Answer the following statements true (T) or false (F)
1. In the short run, each firm is free to vary its maximum capacity.
2. A large number of buyers is an assumption of perfect competition.
3. As long as economic profits are being made, new firms will enter a perfectly competitive industry.
4. Under conditions of perfect competition, if a firm is suffering a loss but AR is above AFC, the firm should always continue to operate.
5. Any time market price is below AVC for all output levels, the firm can reduce its losses by shutting down.
1. FALSE
2. TRUE
3. TRUE
4. FALSE
5. TRUE
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An increase in lifetime wealth
A) increase current labor supply and increase current consumption demand. B) increase current labor supply and decrease current consumption demand. C) decrease current labor supply and increase current consumption demand. D) decrease current labor supply and decrease current consumption demand.
Johnny has allocated $30 toward coffee and tea and feels that coffee and tea are perfect substitutes. Due to differences in caffeine levels, his MRS of tea for coffee equals two. If coffee and tea sell for the same price, Johnny will
A) spend all $30 on tea. B) spend all $30 on coffee. C) spend $20 on coffee and $10 on tea. D) be indifferent between any bundle of coffee and tea costing $30.
Which of the following expressions represents the real exchange rate (?)?
A) E/P. B) EP/P. C) EP. D) EP/P. E) none of the above
A "dynamic" view of income differences
A) considers incomes across different groups over time B) considers incomes across different groups by creating a base year for comparison C) considers income across different groups at a given point in time D) averages all incomes into a single measure of differences