"A perfect competitor should maximize total revenues." Do you agree or disagree? Explain
What will be an ideal response?
Disagree. A perfect competitor should maximize total profits instead of total revenues. Because the firm's average revenue is constant for all output levels, its total revenues increase proportionally to its output. However, because its total costs do not increase proportionally to output. As such, there is a level of output at which total profits—the difference between total revenues and total costs—are maximized.
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When the quantity of real GDP demanded exceeds the quantity of real GDP supplied, firms
A) increase production and prices. B) decrease production and prices. C) increase production and lower prices. D) decrease production and increase prices. E) do not change production because aggregate demand and potential GDP will adjust.
Deposits held by commercial banks are insured by the:
A) Federal Trade Commission. B) Federal Deposit Insurance Corporation. C) Federal Communications Commission. D) Resolution Trust Corporation.
If the interest rate on a U.S. one-year bond is 2%, the interest rate on a Brazilian one-year bond is 8%, and the currency premium on reals (Brazilian currency) is 3%,
what is the expected rate of appreciation of the U.S. dollar according to interest-rate parity? A) -3% B) 3% C) 5% D) 6%
In the Cournot model, a firm maximizes profit by selecting
A) its output, assuming that other firms keep their output constant. B) its price, assuming that other firms keep their price constant. C) its output, assuming that other firms will retaliate. D) its price, assuming that other firms will retaliate.