Whenever indifference curves have kinks, marginal willingness to pay curves have horizontal "flat spots".
Answer the following statement true (T) or false (F)
False
Rationale: If anything, they will have vertical "flat spots" as the MRS (a variant of which appears on the vertical axis of marginal willingness to pay curves) is not well defined at the kink quantity but is defined everywhere else.
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Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will
A. attract other firms to enter the industry, causing the existing firms' profits to shrink. B. cause firms to standardize their product to limit the degree of competition. C. reduce the excess capacity in the industry as firms expand production. D. make the industry allocatively efficient as each firm seeks to maintain its profits.
The more sensitive people are to a change in price, the
A) greater a change in price must be to induce a certain change in quantity demanded. B) greater is the price elasticity of demand. C) smaller the price elasticity of demand. D) closer the price elasticity of demand is to one.
Employee benefits mandated by the government make it
A. More difficult to achieve full employment with stable prices. B. Easier to achieve stable prices but more difficult to achieve full employment. C. Easier to achieve full employment with stable prices. D. Easier to achieve economic growth.
The short-run shutdown price for a perfectly competitive firm is where price equals
A. MR. B. minimum ATC. C. AR. D. minimum AVC.