Suppose a consumer is willing to pay $20 for one unit of good X, $10 for a second, and $5 for a third, and the market price is $4. The consumer surplus is:
A. $16.
B. $6.
C. $1.
D. $23.
Answer: D
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In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because
A) any economic profit would attract newcomers to the industry. B) the firms are incompetent. C) any economic loss would increase the demand for the good, thereby raising its price. D) there are many buyers and sellers.
There are only two firms in an industry with demand curves q1 = 30 - P and q2 = 30 - P. Both have no fixed costs and each has a marginal cost of 10 per unit produced
If they behave as profit maximizing price takers, each produces 10 units and sells them at a price of 10 so that each firm makes zero economic profits. If they form a cartel, their inverse demand curve is A) Q = 30 - P. B) Q = 60 - 2P. C) P = 60 - 2Q. D) P = 30 - Q/2.
The law of demand states that
a. quantity demanded is inversely related to price b. quantity demanded is directly related to income c. marginal utility is inversely related to quantity consumed d. total revenue is directly related to price e. demand curves are linear
Say a firm that sells its product at a price of $20 is using 20 units of labor. If the marginal product of the last unit of labor hired was 10, and the firm pays each worker a wage of $40, then this firm should
A. hire more workers. B. keep the same number of workers. C. decrease the number of workers. D. decrease its output.