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Marginal cost is calculated by dividing
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the change in total cost by the change in the quantity of output produced
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The short run is a
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period of time when plant size cannot be changed
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The law of diminishing returns causes the shape of the average-total-cost curve to be
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U-shaped
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Which of the following does not change with the level of output?
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Total fixed cost
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The existence of economic profits in a competitive market
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will attract competitors
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A firm maximizes profit when
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marginal revenue equals marginal cost
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The additional cost a firm incurs from selling an extra unit of output is
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marginal cost
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To calculate a price elasticity of demand, we need to
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divide the percentage change in the quantity demanded by the percentage change in the price.
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If demand is unit elastic, a 25 percent increase in price will result in
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a 25 percent decrease in the quantity demanded
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A price elasticity of demand greater than 1 means that
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the product has an elastic demand
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If demand is perfectly inelastic, then the
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demand curve will be a vertical line
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A horizontal demand curve is
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perfectly elastic
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The campus bookstore has reduced prices on pens and pencils in order to increase total revenue from sales of these items. Therefore, the manager of the campus bookstore believes that the demand for pens and pencils at the bookstore is
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elastic
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When demand is perfectly inelastic, an increase in price will result in
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an increase in total revenue
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If a 5 percent change in the price of a good causes a 5 percent change in the quantity demanded of that good, the price elasticity of demand is
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unit elastic
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Assume that the price elasticity of demand of a product is 0.25. Given a 10 percent increase in price, we will see a
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2.5 decrease in the quantity demanded
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If demand is unit elastic, a 25 percent increase in price will result in
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d. a 25 percent decrease in the quantity demanded.
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