t (S) MC ATC AVC 1.25 1.05 90 .60 15 20 35 Output Rate 20. Refer to the above gr
ID: 1119437 • Letter: T
Question
t (S) MC ATC AVC 1.25 1.05 90 .60 15 20 35 Output Rate 20. Refer to the above graph. It shows the cost curves for a competitive firm. If the market price falls to S0.55, the optimal output rate is: a. 0 b. 15 d. More than 20, but less than 35 21. Which of the following best describe a monopolistically competitive firm? a. Supplies a small share of the market and sells a product that is not differentiated from other firms in the market. b. Supplies a large share of the market and sells a product that is not differentiated from other firms in the market c. Supplies a small share of the market and sells a product that is slightly different than its competitors. d. Supplies a large share of the market and sells a product that is slightly different than its competitors. 22. Perfect competition produces allocative efficiency in the long run because: a. Price equals average total cost b. Marginal cost equals average total cost c. Marginal revenue equals price d. Marginal cost equals price 23. Suppose that a firm produces 200,000 units a year and sells them for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of a. $500,000 and an economic profit of $200,000 b. $400,000 and an economic profit of $200,000 c. $300,000 and an economic profit of $400,000 d. $200,000 and an economic profit of $500,000Explanation / Answer
Q20
Answer
Option a
the firm will shut down price below minimum average variable cost
Q21
Option c
the firm has small share of the market and differentiated product but the product has substitutes.
Q22
Answer
Option d
The allocative efficiency is at MC=P
Q23
Answer
Option
Accounting profit=TR-explicit cost
=200000*10-1500000=500000
economic profit=Accounting profit-implicit cost
=500000-300000=200000
option a
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