Assume a firm is operating under conditions of pure competition and faces a marginal cost function that is everywhere below its average total cost
If the firm is producing where marginal revenue equals marginal cost will it be possible for it to make an economic profit? Explain.
Since the firm is producing where marginal revenue equal marginal cost and marginal cost is below the average total cost then the firm will not be able to make an economic profit. The reason is that marginal revenue is equal to price under conditions of pure competition. Since the firm is producing where marginal revenue equal marginal cost that means that the price is also below the average total cost.
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A) rightward; decrease B) leftward; decrease C) rightward; increase D) leftward; not change E) rightward; not change
Which of the following is the outcome of the lemons problem in the used-car market?
A) Only low-quality cars will be traded in the market. B) Only high-quality cars will be traded in the market. C) Both low-quality and high-quality cars will be traded in the market. D) No cars will be traded in the market.
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A. 800 million B. 250 million C. 1.6 billion D. 1.0 billion
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