2. i) A new movie is being released that you are excited to see. The personal va

Question

2. i) A new movie is being released that you are excited to see. The personal value you receive from seeing the movie is $20. You purchase an advanced ticket for $10. If you lose the ticket, what is the most you should be willing to pay for a new ticket if losing the ticket does not change the value received from watching the movie?

a. $20
b. $15
c. $10
d. $5

ii) If a firm in a competitive market doubles the quantity of units sold, total revenue will exactly double.
True
False

iii) If a firm chooses to produce at its efficient scale, it should choose the output level where
a. marginal cost intersects with average total cost.
b. average variable cost is minimized.
c. average fixed cost is minimized.
d. marginal cost is minimized.

Explanation / Answer

Answer.)

Q2.)

i.) a. $20

Consumer will be willing to pay at maximum $20 because losing the ticket does not change the value received from watching the movie.

ii.) True

Since in a perfectly competitive market all parties are is a price-taking parties and demand curve is horizontal then a firm can sell any amount of output at current price level.

iii.) a. marginal cost intersects with average total cost.

Efficient scale is the quantity of output that minimizes average total cost.

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