Questions marked (T.F,U) should be answered \"True,\" \"False,\" or \"Uncertain,
ID: 1104071 • Letter: Q
Question
Questions marked (T.F,U) should be answered "True," "False," or "Uncertain," and your answer should be briefly justified. Note that points will be awarded based only on your reasoning, not on the answer itself, even if correct (1) (T,F,U) Just as an entrepreneur who maximizes profits necessarily minimizes costs, an entrepreneur who the minimizes the costs of producing a given output will also (2) (T.F,U) A firm in a competitive industry has a marginal revenue which depends on (3) (T,F,U) In a competitive industry, the price elasticity of the aggregate industry maximize profits the shape of the consumers' demand curves supply curve will always be greater than or equal to the price elasticity of the supply of any individual firm (4) (T,F,U) When a competitive firm facing a rise in output price p responds by increas- ing output, this will increase the demand for any normal goods used inputs; however, demand for inferior inputs may decreaseExplanation / Answer
1) the statement is uncertain. Entrepreneur is usually concerned with production of goods and services in an innovative manner and the aim is not only profit maximization. Profit maximization does not imply cost minimization. Sometimes firms are more than willing to have a larger market share by minimising the cost and reducing the price to oust the competitor and for this the form may be willing to have revenue maximization and a stable and certain level of profit.
2) the statement is false. The demand curve the marginal revenue curve and the average revenue curve all are horizontal and fixed at the market price for a competitive firm. A consumer demand is usually download sloping while the demand curve faced by a purely competitive firm is perfectly elastic
3) the statement is uncertain because the aggregate industry supply curve is formed by aggregating the marginal cost curves rising from the minimum of average variable cost. The elasticity will depend upon the price and quantity combination at the equilibrium and it cannot be said with perfect certainity that who's elasticity is more.
4) the statement is true because when the firm observe higher price for the output it increases the demand for inputs and will be willing to pay a higher price for input that are normal and would not demand in inferior inputs because the income has increased and so it will demand less of inferior goods.
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