Can a firm experience diminishing returns in the long run?
What will be an ideal response?
No. A firm will never experience diminishing returns in the long run because in the long run all inputs are allowed to vary. Diminishing returns occur when the marginal product decreases because a variable input is increased while at least one other variable is held constant.
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Use the above figure. Suppose that a regulatory agency requires this natural monopolist to engage in marginal cost pricing. This would lead to
A) losses, which would drive the monopolist out of business in the long run. B) profits, which would encourage new producers to enter the industry in the long run. C) profits, but new firms cannot enter the industry in the long run due to high barriers to entry. D) losses, which would encourage the monopolist to lower costs in the long run.
In a perfectly competitive market, firms will exit in the
a. short run if they are suffering economic losses b. short run if they are earning below-normal profit c. short run if price exceeds average total cost d. long run if they are earning above-normal profit e. long run if they are suffering economic losses
A monopolistic competitor can expect to earn an economic profit in the long run
a. True b. False Indicate whether the statement is true or false
The rate at which one currency is traded for another is called a(n)
a. prime rate. b. trade rate. c. exchange rate. d. money rate.