The profit-maximizing condition for a perfectly competitive firm is:
A. P = MC.
B. MR = AVC.
C. MR = P.
D. P = AVC.
Answer: A
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Which of the following goods is likely to have an income elasticity of demand greater than one?
A) Salt B) Gasoline C) Diamond jewelry D) Bread
Why is the supply of oil more price elastic in the long run?
A) New deposits are found. B) Better extraction technology is developed. C) Firms have the ability to change the amount of all inputs. D) All of the above.
A contingent contract can create production inefficiency; however, many principals accept this because
A) inefficiency is inevitable. B) monitoring is costless. C) risk is reduced. D) profit will increase as a result.
An example of a nontradable good is:
A. a lead-painted toy from China. B. a stack of firewood from Montreal, Canada. C. a dish of handmade pasta in Lucca, Italy. D. All of these would be considered a nontradable good.