Suppose your parents are thinking of buying you a brand new car as a graduation present. Economists would argue that it would be better if:
A. They gave you a cash gift equal to the value of the car regardless of how much you need a car right now
B. They ask you for what kind of car you want first and then buy it for you
C. They gave you a cash gift equal to the value of the car long as you really don't have much use for a car right now
D. You sell the car to someone else right away in exchange for the cash
Answer: A
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If marginal cost is less than average total cost,
a. marginal cost must be falling b. average total cost must be increasing c. average variable cost equals average total cost d. average variable cost must be decreasing e. average variable cost may be increasing or decreasing
Excess capacity occurs in long-run equilibrium under monopolistic competition so that: a. price is less than marginal cost
b. price exceeds minimum average cost. c. marginal revenue exceeds price. d. all of the above occur.
Suppose a firm has a weekly cost function of C(Q) = 8Q + (Q2/100) and a marginal cost function of MC = 8 + (Q/50). What is the efficient scale of production, and what is the minimum average cost?
A. Qe = 0; AC = $0 B. Qe = 0; AC = $8 C. Qe = 8; AC = $8 D. Qe = 8; AC = $64.64
For a typical product, an increase in consumer income will cause the market demand for the product to
a. decrease, which is a shift to the left of the demand curve. b. decrease, which is a shift to the right of the demand curve. c. increase, which is a shift to the left of the demand curve. d. increase, which is a shift to the right of the demand curve.