Suppose a firm has the following total cost function TC = 100 + 2q2. If price equals $20, what is the firm's output decision? What are its short-run profits?
What will be an ideal response?
MC = 4q. To maximize profit, set 20 = 4q, or q = 5. Profit = TR - TC = (20 ? 5 ) - (100 + 50 ) = -50. Since FC = 100, the firm will produce 5 units and operate at a loss of 50 rather than shutting down and incurring a loss of 100.
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Technological changes that increase the productivity of skilled workers relative to that of unskilled workers are referred to as:
A) skill-biased technological changes. B) labor-saving technological changes. C) unskilled-biased technological changes. D) labor-complementary technological changes.
The equilibrium price charged by a monopolistic competitor in the long run after the entry of new firms is ________
A) higher than the equilibrium price charged by the firm before the entry of new firms B) lower than the equilibrium price charged by the firm before the entry of new firms C) lower than the equilibrium price charged by a perfectly competitive firm in the long run D) equal to the equilibrium price charged by the firm before the entry of new firms
What is a natural monopoly and what problem does natural monopoly pose for regulators?
What will be an ideal response?
The problem faced by the lender that the borrower may take on additional risk after receiving the loan is called
A) adverse selection. B) moral hazard. C) transactions costs. D) diversification.