If the average cost curve for an individual firm is decreasing when it intersects the market demand curve, why is a natural monopoly likely to develop in this market? Explain
What will be an ideal response?
Perfect competition leads to firms increasing size until reaching the minimum of the AC curve. If firms naturally did so, before reaching this size, a single firm would be left in the market. That firm will no longer need to act as a price-taker as its size gives it cost advantages over potential entrants.
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Mark can make 3 tables and 1 chair in a day while John can make 4 tables and 1 chair in a day. Which of the following is true?
A) Mark has a comparative advantage in making tables. B) Mark has an absolute advantage in making tables. C) John has an absolute advantage in making tables. D) John has a comparative advantage in making chairs.
Refer to Table 1-2. What is Julius's marginal benefit if he decides to stay open for three hours instead of two hours?
A) $15 B) $25 C) $65 D) $80
If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should
A) increase its use of labor and employ less capital. B) employ more capital. C) increase its use of both labor and capital. D) maintain its current factor utilization pattern.
Which of the following is classified as a sunk cost?
a. Cost of the next best alternative b. Additional cost of producing an additional unit c. Research costs to determine the implementation of a technology d. Total cost of producing a product