The rising portion of a perfectly competitive firm's marginal cost curve, above the intersection with AVC, is its
A) demand curve.
B) economic profit.
C) supply curve.
D) accounting profit.
Answer: C
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Indicate whether the statement is true or false
A waitress brings a free glass of wine when you sit down in a restaurant. This glass of wine is
A) a service because the waitress carried it instead of making it. B) a good, but not an economic good because there is no price charged for the wine. C) a nongood because there is no price charged for the wine. D) an economic good because wine is produced with scarce resources, even if it is free to you.
Fresh Flour makes baking flour and sells its flour in 4 pound sacks or bags. The managers of Fresh Flour are considering whether the firm should make or buy the flour sacks. To make the sacks, Fresh Flour needs a $500,000 piece of equipment. Using this equipment, Fresh Flour can make a flour sack for $0.01 and, for simplicity, ignore taxes and assume that the $0.01 cost includes depreciation and
all other costs. Fresh Flour would finance the $500,000 investment using its own funds and, if it purchased the flour sacks from another firm, it would pay $0.19 a flour sack. The life span of the equipment is 10 years and it has no salvage value at the end of the ten years. The discount rate is 6 percent. How many flour sacks does Fresh Flour need each year in order for the net present value to be positive? A) 259,666 B) 377,416 C) 352,589 D) 412,369
Because a competitive firm is a price taker, it faces a demand curve that is:
a. perfectly inelastic. b. relatively inelastic. c. relatively elastic. d. perfectly elastic.