If mircosoft is determining whether to build a new plant in southern california
ID: 1253642 • Letter: I
Question
If mircosoft is determining whether to build a new plant in southern california or in New Mexico, it is making a(n)_______ decision.a. variable-input
b.long-run
c.short-run
d.immediate-run
Every point on the long-run average cost curve is
a. on a short-run average total cost curve
b.also a minimum point on a short-run average cost curve
c.on a short-run marginal cost curve
d.on a short-run average variable cost curve
For a perfect competitor, marginal revenue equals
a.price divided by average revenue
b.the market price
c.the slope of the demand curve
d.average revenue divided by price
The law of diminishing marginal product shows the relationship
a.between inputs and outputs for a firm in the short-run
b.between accounting and economic profits
c.between short-run and long-run outputs of a firm
d.between inputs and outputs for a firm in the long run
Explanation / Answer
1. b long run. building a new plant is a long run decision since number and size of plants are components of capital, and capital is generally fixed in the short run 2. b. This is one way of defining a long run average cost curve, the other being to plot long-run total cost divided by the quantity of output produced at different output levels. 3. b. Profit maximization in perfect competition occurs where marginal revenue equals marginal cost. If the marginal cost were greater than marginal revenue, the firm could increase revenue by producing fewer goods, and if it were less than marginal revenue, they could increase revenue by producing fewer goods. When in perfect competition, if price were greater than marginal cost, the firm would lose their customers to lower priced competitors and if the price were less than marginal cost, they would lose money on each unit sold, since the marginal cost is how much it costs them to make each unit they would be losing money on each unit sold at below marginal cost 4. a. marginal product is how much extra output is gained from one additional unit of input. Since this input is allowed to change, the change is in the short run
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