The vertical distance between the horizontal axis and any point on a perfect com
ID: 1253629 • Letter: T
Question
The vertical distance between the horizontal axis and any point on a perfect competitor's demand curve measures,a.total cost
b.product price,marginal revenue, and average revenue
c.supply curve for the product
d.total revenue
If the price of labor is constant and a firm experiences diminishing marginal product, then its
a. marginal costs increase
b.fixed costs increase
c.marginal costs decrease
d.total costs decrease
If the average product of 20 workers is 100 bushels of wheat and the average product of 21workers of wheat is 99 bushels of wheat, then the marginal product of the 21st worker was
a.5 bushels of wheat
b.99 bushels of wheat
c.-1 bushels of wheat
d.79 bushels of wheat
If markets are perfectly competitive, then the production of goods
a.will always lead to business failures
b.will require government intervention
c.will occur at an average total cost value that is above the minimum
d.will use the least costly cominabtion of resources
The short-run supply curve for the perfectly competitive firm is the portion of its
a.MC curve above the MR curve
b.MC curve above the AVC curve
c.MC curve above the ATC curve
d.MC curve above the AFC curve
Explanation / Answer
1. b - essentially, this is asking you what the y-axis is 2. a - diminishing marginal product means the return from labor is decreasing (in other words, each additional employee is making less and less additional product). For example, worker 3 adds 15 additional units per hour, but when I hire a 4th worker, he only adds 10 units per hour. The fact that cost of labor is constant means that it is costing us more money per unit as more workers are added. 3. d - when you have 20 workers making an average of 100 (or 100 each), you are making a total of 2000 bushels. When you add an additional worker, and the average drops to 99, you must be making a total of 99 * 21 = 2079. This means that the additional worker contributed 79 bushels to what you had been making previously. 4. d - in a perfectly competitive market, firms are price takers, so they can only make money by reducing their costs 5. b - this is just how it works... kind of a definition thing. I guess if I had to explain it, I'd say the MC needs to be above the ATC or else the firm wouldn't make money..-if that makes sense.
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