True or false? For each of the following statements, circle \'T\' if you think t

Question

True or false? For each of the following statements, circle 'T' if you think the statement is
true and "F}} if you think it is false. No explanation is required. Each statement is worth 3 points.

T F - When the fixed cost of a profit maximizing firm increases, the best strategy is to
increase price in order to compensate for the cost increase.

T F - In economics, "short run" is the name for a time period during which the level of
output is fixed.

T F - A firm should shut down in both the short run and the long run if revenue is not
covering fixed costs.

T F - If an industry consists often firms of equal size, then the Hirschmann-Herfindahl index
for that industry is 1000.

T F - In Stackelberg oligopoly, the leader firm always makes more profit than a similar firm
in Bertrand oligopoly, and the follower firm always makes less profit than a similar
firm in Bertrand oligopoly.

Explanation / Answer

False, in case the fixed costs increases, the best strategy is not of increasing prices to cover costs.A very high price could reduce the quantity by so much amount that total revenue might become lesser than costs.

False, short run is the name given to the time period when the factors of production are fixed and not the output level.

False, in the short run a firm shuts down only if it cannot cover even variable costs.While in the long run it shuts down only if it cant cover total costs.

False, hirschman herfindahl index is a measure of degree of concentration in the industry.This ratio is higher only when the market is highly concentrated.For a market where there are large number of firms each enjoying an equal share of output , market is very competitive and hence the HH index would be very low in such markets.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.