Can a firm's average cost be rising if it is greater than the firm's marginal cost? Explain
No. Average cost is determined by marginal cost. If the marginal cost is lower than the average cost, then it
is pulling the average cost down, and so the average cost will be falling.
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Suppose a country, whose production and consumption of cell phones is large relative to the world market, has just entered the global market. If the country is a net-importer of cell phones, we would expect the world:
A. supply curve to shift more to the left than the world demand curve as a result. B. demand curve to shift more to the right than the world supply curve as a result. C. demand curve to shift more to the left than the world supply curve as a result. D. supply curve to shift more to the right than the world demand curve as a result.
A tax on labor income __________. The equilibrium quantity of labor __________.
Fill in the blank(s) with the appropriate word(s).
Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has marginal costs equal to $2. If the market price of golf balls is $1, Kevin should:
A. decrease the level of golf ball production. B. continue producing the current level of production. C. increase the production of golf balls. D. raise the price of its golf balls.
A consumer has been buying 3 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will
A) buy more magazines because they are now relatively more valuable than they were before, while continuing to buy the same number of books. B) buy more books because they are now relatively more valuable than they were before. C) buy the same number of books and magazines as before because they provide different types of utility. D) buy fewer books than before because they are relatively more expensive than they were before.