Consider a firm with one fixed cost, rent, and one variable cost, wages. Describe the effects of an increase of this firm's rent
The firm's ATC curve shifts up, but the AVC and MC curves don't change since they depend only on
variable costs. Although the firm's ATC curve will shift up, it will continue to produce the same level of
output where its price equals its marginal cost. Its profits fall and, perhaps, become negative.
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Refer to the scenario above. Which of the following statements is true?
A) The discounted value of $3,400 to be received after five years is $3,000. B) Tom's return from investing in his friend's project is higher than the amount received from the bank after five years. C) Tom's return from investing in the bank is higher than the amount received from his friend's project after five years. D) The returns on both investments are likely to be similar and Tom should be indifferent about investing in either options.
Which of the following statements is true?
A) Monopoly is characterized by no entry barriers. B) Perfect competition is characterized by high entry barriers. C) Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers. D) Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers.
Which of the following best illustrates the mutual interdependence among firms in the airline industry?
A) The considerable efforts made by the various competitors to coordinate fare increases. B) The unwillingness of individual firms to match increased amenities offered by other firms. C) The substantial profits airlines have earned over the past several years. D) The virtual absence of control over costs by any of the firms operating in the industry.
Price-fixing:
A. is prohibited by Section 7 of the Clayton Act. B. is a per se violation of the antitrust laws. C. may be either legal or illegal depending on whether or not it produces above-normal profits. D. is illegal under terms of the Federal Trade Commission Act.