We don’t need to draw separate curves for demand, average revenue, and marginal revenue curves for a perfectly competitive firm. Why?
What will be an ideal response?
Under perfect competition the firm’s demand curve, average revenue curve, and marginal revenue curve are all the same. A firm’s demand curve is also its average revenue curve if it sells its product at the same price to each and every customer, because the average revenue a firm gets from selling a commodity is equal to the price of the commodity. In perfect competition, the price does not depend on how much the firm sells. Then each additional unit sold brings in an amount of additional revenue (the marginal revenue) exactly equal to the market price which means marginal revenue always equals price under perfect competition.
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The demand for a luxury good whose purchase would exhaust a big portion of one's income is
A. relatively elastic. B. relatively inelastic. C. perfectly elastic. D. unit-elastic.
In a survey of consumers, Daniel Kahneman, Jack Knetsch and Richard Thaler asked their opinion of a hardware store's decision to
A) remain in business even though the store was not making an economic profit; 82 percent of those surveyed believed it would be unfair for the store to go out of business if there were no other hardware stores in the same area. B) go out of business because a larger hardware store opened in the same city; 82 percent of those surveyed believed it was unfair for the larger store to compete with the smaller store. C) sell tickets to sporting and cultural events at prices higher than prices paid at the ticket windows for the same events; 82 percent of those surveyed believed this was unfair. D) raise the price of snow shovels the day following a snowstorm; 82 percent of those surveyed believed this was unfair.
Profit maximization implies that firms will want to ________
A) accumulate capital while the MPK is greater than the real wage B) accumulate capital while the MPK is greater than the rental price of capital C) accumulate labor while the MPK is greater than the rental price of capital D) accumulate labor while the MPK is greater than the real wage E) none of the above
Which of the following is NOT a feature of recent U.S. business cycles?
A) The time series of deviations from trend in real GDP is quite choppy. B) The time series of deviations from trend in real GDP is quite smooth. C) There is no regularity to the amplitude of fluctuations in real GDP above trend. D) There is no regularity to the frequency of fluctuations in real GDP above trend.