1-In the long-run, in a monopolistically competitive market: A. price equals mar
ID: 1114922 • Letter: 1
Question
1-In the long-run, in a monopolistically competitive market:
A.
price equals marginal cost.
B.
marginal revenue is greater than average revenue.
C.
resources are inefficiently allocated.
D.
price equals minimum average total cost.
E.
the firms earn positive economic profits.
2-An individual perfectly competitive firm’s supply curve is its:
A.
total cost curve.
B.
marginal cost curve.
C.
average-fixed-cost curve.
D.
marginal revenue curve.
E.
average-variable-cost curve.
3-A perfectly competitive firm produces 50 units of output, at equilibrium, in the short run. The total cost borne by the firm is $300 and the average revenue is $2. Therefore, the firm:
A.
is facing a positively sloped demand curve.
B.
is just breaking even.
C.
is earning positive profits.
D.
is experiencing diseconomies of scale.
E.
is suffering losses.
4-When there is a divergence between social costs and private costs in a market, _____.
A.
there will be an excess supply of goods and services in the market
B.
there will be an acute shortage of goods and services in the market
C.
all resources are being used in their highest-valued activity
D.
the market will always provide an efficient allocation of resources
E.
there will be too much or too little production and consumption in the market
A.
price equals marginal cost.
B.
marginal revenue is greater than average revenue.
C.
resources are inefficiently allocated.
D.
price equals minimum average total cost.
E.
the firms earn positive economic profits.
Explanation / Answer
Answer.)
1.) D.) price equals minimum average total cost.
As entry into the market increases, the firm's demand curve will continue shifting to the left until it is just tangent to the average total cost curve at the profit maximizing level of output
2.) B.) marginal cost curve.
3.) E.) is suffering losses.
Given that AR = $2 also note that AC = TC / Q = 300 / 50 = $6
SINCE AC > AR therefore, firm is suffering with losses.
4.) E.) there will be too much or too little production and consumption in the market
Im case of negative externality there will be too much production and consumption and in case of positive externality there will be too little production and consumption.
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