Increasing returns to scale occurs when a firm's:
a. average costs of production increase as its output increases.
b. average costs of production decrease as its output increases.
c. average fixed costs increase as its output increases.
d. marginal costs increase as its output increases.
Ans: b. average costs of production decrease as its output increases.
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Suppose a monopolistic competitor produces 2,000 units of the good in equilibrium and charges a price of $10 for each unit. If the average total cost of producing 2,000 units of the good is $6, what is the total profit earned by the producer?
A) $8,000 B) $4,000 C) $2,000 D) $20,000
The market structure in which the largest quantity of output is sold at the minimum possible price is:
a. monopoly. b. perfect competition. c. oligopoly. d. monopolistic competition. e. monopsony.
If demand is perfectly elastic, then
A) demand and price are inversely related. B) quantity demanded and price are inversely related. C) the demand curve is a vertical line. D) the demand curve is a horizontal line.
Which of the following characterizes the largest difference between the way decisions are made in the private sector versus the public sector?
A. Costs and resources are vastly different in each sector. B. The incentive system for individuals to perform efficiently are vastly different. C. The workers themselves are really quite different types of people. D. In both sectors individuals will try to maximize their own individual gains over the gains of others.