If a firm’s average cost is declining, setting price equal to marginal cost will
A. maximize the firm’s profits.
B. minimize the firm’s losses.
C. guarantee that the firm will lose money.
D. help the firm earn the opportunity costs of its resources.
Answer: C
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A straight-line demand curve along which the price elasticity of demand equals 0 is one that
A) forms a 45 degree angle with the vertical axis. B) forms a 60 degree angle with the horizontal axis. C) is vertical. D) is horizontal.
Suppose a firm produces pollution when it generates electricity. The cost of the pollution is called the
A) marginal cost. B) marginal private cost. C) marginal external cost. D) marginal social cost.
If goods X and Y are such that the cross price elasticity between them is negative, and if the income elasticity of X is negative, then these goods are
a. inferior complements b. luxury complements c. income elastic substitutes d. normal substitutes e. income elastic complements
Refer to the information provided in Figure 16.2 below to answer the question(s) that follow.
Figure 16.2Refer to Figure 16.2. The marginal damage cost imposed as a result of producing cars is
A. $5.00 per car. B. $10.00 per car. C. $15.00 per car. D. indeterminate from this information.