Why is the short-run demand curve for labor downward sloping?
What will be an ideal response?
The firm will pay another unit of labor as much as the amount that the firm benefits from having another unit of labor. In a competitive market this amount is equal to P ? MP. As more labor is hired, MP declines. Thus, since the value of the marginal unit of labor declines as more labor is hired, the demand curve is downward sloping.
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If your long-run costs exhibit increasing returns to scale, securing big orders leads you to
a. Increase average costs b. Reduce average costs c. Keep the average costs constant d. None of the above
Balin's Burger Barn operates in a perfectly competitive market. Balin's is currently earning economic profits of $20,000 per year. Based on this information, we can conclude that
A) Balin's is operating in the short run, but not the long run. B) Balin's is operating in the long run. C) Balin's profits will discourage new firms from entering. D) Balin's will increase its market price over the counting months.
Positive economics seeks to understand behavior, but not make judgments.
Answer the following statement true (T) or false (F)
The conclusion that the level of output is efficient at the market equilibrium rests on all of the following assumptions EXCEPT that __________.
A. buyers and sellers are well-informed B. there are no external costs or benefits C. the government regulates price and output D. the market is perfectly competitive