A firm sells a product in a perfectly competitive market. The marginal cost of the product at the current output level of 500 units is $1.50. The minimum possible average variable cost is $1. The market price of the product is $1.25. To maximize profits, the firm should
A. decrease production to less than 500 units.
B. increase production to more than 500 units.
C. continue producing 500 units.
D. shut down.
Answer: A
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Suppose a new technology is developed that increases the productivity of labor. You would expect
A. the wage rate to fall, since employers will want less labor. B. the demand for labor to fall. C. the demand for labor to rise. D. an increase in unemployment as firms replace labor with technology.
Do firms in perfect competition advertise their products? Why or why not?
What will be an ideal response?
The value of goods produced, but unsold, in the current period is:
A. allocated to GDP in future periods when the goods are sold. B. counted in GDP as inventory investment. C. counted in GDP as consumption spending. D. excluded from GDP.
Plot the demand for caviar given the following information on quantity consumed and total utility; then explain why caviar sells for such a high price. Quantity (in ounces) Total Utility (in dollars) 1 50 2753 884 95 599?
What will be an ideal response?