Q1---Which of the following statements is TRUE about the graph the below? 1- Mor

Question

Q1---Which of the following statements is TRUE about the graph the below? 1- More output is produced at point A then at point B 2- The ratio of the marginal product of labor to the marginal product of capital is higher at point A then at point B 3- the MRTSxy is equal at points a and B.
A: 1,2, and 3 are correct B: only 2 is correct C: only 3 is correct D: 2 and 3 are correct
Q2---Consider the graph below about monopolist marginal cost, average total cost, demand, and marginal revenue curves. And I situation, the price at the monopolist would charge is:
True or false? Q3---If a perfectly competitive firm is making a loss in the short run, it should produce where price equals marginal cost so long as the price is higher than the minimum average variable cost.
Q4---In the long run under perfect competition, if price is initially above average total cost, the quantity produced by each firm and the price it charges will both fall.
Q5---Diseconomies of scale exist when average variable cost is increasing.
Q6---Under any market condition, marginal revenue is always equal to market price. OroS Capital (K) 15 12 2 0-14 0 234 10 Labor ( 1 2 3 4 5 6 7 8 9 10 Labor (L)

Explanation / Answer

1.The correct option is (B).

So the ratio of the marginal productivity is MP =Q/L

Putting the values we get MP at A = 9/2= 4.5 and MP at B = 3/7 =0.42857

So the ratio of the marginal productivitiy of labour to capital is higher at A than at B.

2. The price that the monopolist would charge is 30$ because this price corresponds to the point where the marginal revenue is equal to the marginal cost. And so at this point the profit is maximized.

3.True. In the short run the firm continues to produce as long as the price remains greater than or equal to the minimum of AVC. Therefore, along the supply curve as we move down, the last price-output ombination at which the firm produdes a positive output is the point of minimum AVC where the MC curve cuts the AVC curve.

4.False. In the long run if the price is higher than the average total cost then the firm will be earning super normal profit. This will attract more firms into the business which will increase the production(quantity increases) and so the price will fall so that the supernormal profit is neutralized and all the firms earn normal profits.So the quantity increases but the price falls.

5. True. If the average variable cost is increasing then for the production of each additional unit the cost increases. So, large scale production will not reduce the total cost and hence there will be diseconomies of scale.

6.True. The marginal revenue always shows the market determined price.

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