If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm
a. will be earning positive economic profit at the profit-maximizing quantity.
b. will have economic profit less than zero at the profit-maximizing quantity.
c. will have zero economic profit at the profit-maximizing quantity.
d. should increase the quantity of production to increase profit.
b
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Suppose there are two goods: guns and roses. Also suppose Australia is initially closed to trade. When international trade is opened, Australia chooses to sell guns and buy roses in the world markets.
(i) Which is higher, Australia's autarkic relative price of guns or the world relative price of roses? (ii) If the world relative price of guns falls, will Australia be better off or worse off? What if the world relative price of guns rises? Explain.
Joe's income is $500, the price of food (F) is $2, and the price of shelter (S) is $100. Which of the following bundles is in Joe's opportunity set?
A) 50 units of food, five units of shelter B) 200 units of food, two units of shelter C) 100 units of food, one unit of shelter D) 150 units of food, three units of shelter
Consumers who put a high value on a service
A) are better off with perfect price discrimination. B) are better off under a single-price monopoly. C) are indifferent between perfect price discrimination and a single-price monopoly. D) incur deadweight loss under either single-price monopoly or perfect price discrimination.
One implication of the shape of the demand curve facing a perfectly competitive firm is that:
A. the market would be unable to reach a new equilibrium if demand changed. B. if the firm increases its price above the market price, it will earn zero revenue. C. if the firm decreases its price below the market price, it will earn higher revenue. D. if the firm increases its price above the market price, it will earn higher revenue.