Under what condition are profits maximized?
A. at the output rate where marginal cost is greater than marginal revenue
B. at the point at which the difference between total revenues and total costs is negative
C. at the rate of output at which marginal revenue equals marginal cost
D. at the point at which the difference between price and quantity demanded is greatest
Answer: C
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A) A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production. B) A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit. C) A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level. D) A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible.
Consider the market for ride-on lawn mowers and the recent increases in the price of oil. The recent increase in the price of oil makes it more expensive to manufacture ride-on lawn mowers. An increase in the price of oil also makes it more expensive to run a ride-on mower. If the price of oil increases, the demand for ride-on mowers will ________ and the supply will ________.
A. decrease; increase B. increase; decrease C. decrease; decrease D. increase; increase
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Answer the following statement true (T) or false (F)