For a perfectly competitive firm, marginal revenue equals average revenue because the
A. firm’s supply curve is horizontal.
B. industry’s demand curve is horizontal.
C. firm’s demand curve is horizontal.
D. industry’s supply curve is horizontal.
Answer: C
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AC is lower in the long run than in the short run because
A. prices often fall, allowing savings on purchases. B. inputs can be combined more efficiently in the long run. C. over time the prices of all inputs tend to decrease. D. AFC falls with output over all ranges of output.
Use the following table with data for a private closed economy (an economy with only a private sector and no international trade) to answer the next question.All figures are in billions of dollars.Expected Rate of ReturnInvestmentConsumptionGDP10%$0$400$4008100500600620060080043007001,00024008001,20005009001,400An increase in the real interest rate from 2% to 6% will
A. increase the equilibrium level of real GDP by $400 billion. B. decrease the equilibrium level of real GDP by $400 billion. C. increase the equilibrium level of real GDP by $300 billion. D. decrease the equilibrium level of real GDP by $200 billion.
Suppose a chemical plant regularly dumps chemicals into a river that must be cleaned up before farmers located downstream can use the water on their crops
Dumping the chemicals into the river saves the chemical plant $750,000 in yearly disposal costs and cleaning the water costs farmers $825,000 each year. Explain what the benevolent social planner would like to see happen in this case.
Why are the actions of firms interdependent in an oligopoly market but not in a monopolistically competitive market?