You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 20 ? Q, where Q = Q1 + Q2. The marginal costs associated with producing in the two plants are MC1 = 2 and MC2 = 2Q2. What is the profit-maximizing price that the firm should charge?
A. $11
B. $12
C. $9
D. $8
Answer: A
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The opportunity cost of producing a good rises only slightly as the quantity produced increases. This good has
A) an inelastic demand. B) an elastic demand. C) an elastic supply. D) an inelastic supply. E) a perfectly elastic supply.
Suppose the equilibrium price in a perfectly competitive industry is $100 and a firm in the industry charges $112 . Which of the following will happen?
a. The firm will not sell any of its output. b. The firm will sell more output than its competitors. c. The firm's profits will increase. d. The firm's revenue will increase. e. The firm will gradually take over the entire industry.
The distinction between real and nominal rates of interest is understood by
a. most public policy makers. b. the majority of the American population. c. a majority of legislators. d. relatively few Americans.
If consumers respond to a 10% price reduction by buying twice as much of a particular good, we would conclude that:
A. there was excess demand at the original price. B. the price elasticity of demand at the original price was less than one. C. the price elasticity of demand at the original price was greater than one. D. there was excess supply at the original price.