Answer the following questions true (T) or false (F)
1. For a perfectly competitive firm, average revenue equals marginal cost at the profit-maximizing output.
2. A perfectly competitive firm breaks even at a price equal to its minimum average total cost.
3. Maximizing average profit is equivalent to maximizing total profit.
1. TRUE
2. TRUE
3. FALSE
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Which of the following is TRUE regarding the circular flow diagram?
I. "Aggregate income" is the flow of income earned by firms. II. Retained earnings are considered income earned by firms rather than part of households' income. III. The government, households, and firms all have transactions in the goods market. A) I only B) I and II C) I and III D) III only
Which of the following statements about financial markets and securities is TRUE?
A) Many common stocks are traded over-the-counter, although the largest corporations usually have their shares traded at organized stock exchanges such as the New York Stock Exchange. B) As a corporation gets a share of the broker's commission, a corporation acquires new funds whenever its securities are sold. C) Capital market securities are usually more widely traded than shorter-term securities and so tend to be more liquid. D) Prices of capital market securities are usually more stable than prices of money market securities, and so are often used to hold temporary surplus funds of corporations.
Each of the following, except one, is a condition necessary for a private market solution to an externality problem. Which is the exception?
a. Legal rights must be clearly established. b. Legal rights must be easily transferred. c. The number of people involved must be very small. d. The amount of money involved must be very small. e. Side payments must be arranged without cost.
Corn and soybeans are alternatives that could be grown by most farmers. If government subsidies for ethanol lead to higher corn prices, this will
a. increase the supply of corn. b. increase the supply of soybeans. c. decrease the supply of soybeans. d. decrease the supply of corn. e. have no effect on the supplies of corn and soybeans.