How are market price, average revenue, and marginal revenue related for a perfectly competitive firm and why?
What will be an ideal response?
They are all equal to each other. The market price for any firm equals average revenue. This can be verified by noting that average revenue = total revenue ÷ quantity = (price × quantity) ÷ quantity. Further, a perfectly competitive firm faces a horizontal demand curve at the market price which means that it does not need to reduce the price to sell more. Therefore, its marginal revenue equals price.
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Which of the following statements is true?
A) In a competitive market, the invisible hand encourages the movement of resources from more productive uses to less productive uses. B) In a competitive market, firms in the long run tend to earn positive economic profits. C) Competitive equilibrium provides incentives for entrepreneurs to shift their resources from unprofitable industries to profitable ones. D) At the competitive equilibrium, production occurs at the point of maximum average total cost.
Which of the following is true of an annually balanced federal budget? a. Most economists agree that the federal government should balance its budget just as each household does. b. Such a policy would require the government to increase its spending when tax receipts decrease
c. Such a policy became popular between the 1930s and 1960s. d. Such a policy guarantees that the economy is its potential level. e. Such a policy could worsen a contractionary gap.
Firms that do not reach their minimum long run average cost must, to avoid continued losses, either adjust their scale or leave the industry
Indicate whether the statement is true or false
A newspaper headline reads: "Fed Raises Discount Rate for Third Time This Year." This headline indicates that the Federal Reserve is most likely trying to ________.
A. reduce the cost of credit B. stimulate the economy C. reduce inflationary pressures in the economy D. increase the money supply