1. In producer theory, the goal of the firm is to maximize market share. True/Fa

Question

1. In producer theory, the goal of the firm is to maximize market share.
True/False

2. The law of diminishing returns implies that eventually the marginal product curve will be negatively sloped as the variable input increases.
True/False

3. The industry demand curve in a perfectly competitive industry is horizontal.
True/False

4. An oligopolist will consider the reaction of other firm before it decides to cut its prices.
True/False

5. The majority Voting assures all government will provide a public good if it yields total benefit in excess of total cost.
True/False

6. Which of the following statement is false?
A. Firms and markets are institutions for coordinating economic activities.
B. Firms organize productive resources in order to produce goods and services.
C. Firms use command systems to organize production.
D. Technologically efficient firms can eliminate scarcity.

7. Which of the following is true for a producing single-price monopolist but not for a producing perfect competitor?
a. The firm maximizes profit by setting marginal cost equal to marginal revenue.
b. The firm's marginal cost is less than average revenue.
c. the firm can sell any level of output at any price it sets.
d. The firm is a price-taker.

8. Public choice theory
a. argues that government policies tend to move the economy toward efficiency.
b. argues that the public choice of government maximize net benefits.
c. applies economic tools used to analyze markets to the analysis of government behavior.
d. applies the tools of political analysis to the analysis of economic markets.

Explanation / Answer

1) False. The goal of the firm is to maximize profit. 2) False. The law of marginal return says that the slope of the marginal product curve approaches zero, but never gets there. 3) True, but there's never been such a thing as a perfect competitive market, so the point is kinda moot. 4) Should they? Yes. Do they always? No, that's how you get price wars. 5) This statement is way too complex to be simply true or false. It doesn't take into account individual utility or misinformed voters etc. I would say false but I would also say it is a question wrongly phrased. 6) D. Scarcity cannot be eliminated. No matter how efficient you are, there is still a finite amount of iron ore in the world. 7) A is true for the competetive firm. C isn't true about either. D is true about the competetive firm. The answer must be B. 8) C.

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