question
If fixed costs increase, what will happen to marginal revenue and marginal cost?
answer
both will be unchanged
question
Suppose that the demand for a product increases. What is the most likely effect on the firm's price and quantity?
answer
both with increase
question
Suppose that the firm's marginal cost decreases. What is the effect on the firm's optimal price and quantity?
answer
Price will decrease, quantity will increase.
question
Suppose that demand decreases. What is the most likely effect on the marginal revenue and marginal cost curves?
answer
Marginal revenue will decrease, marginal cost will not change.
question
If the price of a substitute good increases significantly, demand for the competing good will
answer
increase
question
When the price of smart phones decreases, the demand for data plans will
answer
increase
question
In which case is demand likely to be more elastic, the long run or the short run?
answer
The long run, because buyers can find more numerous substitutes.
question
If the price of a good is in the inelastic range and the firm raises price,
answer
Quantity will fall, but revenue will increase.
question
In the short run, a firm should expand the use of a variable input until
answer
Its marginal revenue product equals the input's marginal cost.
question
Which of the following is likely to be a cause of increasing returns to scale?
answer
Increased specialization of labor; A one-time fall in labor costs.
question
In the long-run, a profit-maximizing firm produces such that
answer
The ratios of marginal products to input prices are equal across all inputs; Each input's marginal revenue product equals the input's marginal cost.
question
A firm produces a good in two factories. The marginal product of an input is higher at one plant than at the other. How can the firm reallocate the input to increase profitability?
answer
Increase use of the input at the plant with the higher marginal product; decrease use of the input at the other plant.
question
The minimum efficient scale is
answer
The lowest output at which minimum long-run average cost can be achieved.
question
A firm experiences economies of scope when
answer
The cost of producing multiple goods is less than the aggregate cost of producing each item separately.
question
The point of intersection between the LAC and LMC curves indicates
answer
The plant size where LAC is a minimum.
question
In the short run, the firm should continue to produce if and only if
answer
Price exceeds average variable cost.
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