A microeconomic analysis shows that in a competitive economy in which labor is homogenous and mobile, the ratio of the prices of the products in equilibrium is inversely proportional to:
a. the ratio of the capital used in production.
b. the ratio of the marginal products of labor.
c. the geographical region of the country in which the factory is located.
d. the strength of bargaining power of the workers.
Ans: b. the ratio of the marginal products of labor.
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Average growth rates of per capita income were close to zero, on average, prior to the Industrial Revolution.
Answer the following statement true (T) or false (F)
Refer to Figure 13-14. It is possible to lower the average cost of production by expanding output beyond Q0 to Q1. Why wouldn't a firm expand its output to Q1?
A) Demand is not sufficient for consumers to buy Q1. B) The firm wants to maximize accounting profit rather than economic profit. C) The firm would suffer an economic loss at Q1 while it would break even at Q0. D) The firm's marginal revenue would be negative at Q1.
Suppose the market clearing price is $15 and the price ceiling is $17. The price that prevails in the market will be
A) $17. B) $15. C) less than $15. D) more than $17.
What price will a perfectly competitive firm typically charge in the long run?
a. A price that equals the minimum of its average cost of production b. A price that is lower than its average cost of production c. A price that ensures an accounting profit and an economic profit d. A price that is lower than the price charged by competitors