Why would a firm in a perfectly competitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?
The firm could not sell any more of its product at a lower price than it could sell at the market price. As a result, it would needlessly forgo revenue if it set a price below the market price. If the firm set a higher price, it would not sell anything at all because a competitive market has many sellers who would supply the product at the market price.
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The figure above shows the production possibilities frontier for a country. If the economy is operating at point B, then the opportunity cost of another million gallons of milk is
A) 4 gallons of ice cream for a gallon of milk. B) 3 gallons of ice cream for a gallon of milk. C) 1 gallon of ice cream for a gallon of milk. D) 1/3 of a gallon of ice cream for a gallon of milk. E) zero because after producing another million gallons of milk then zero gallons of ice cream are produced.
Government-imposed limits on price movements are likely to
a. increase economic efficiency. b. decrease economic efficiency. c. leave economic efficiency unchanged. d. promote economic growth in the economy.
Complete crowding out occurs when an increase in government spending is completely offset by an equal increase in tax revenues
Indicate whether the statement is true or false
At a price of $18, the marginal revenue of a movie seller is $12. If the marginal cost of a movie is $9, the firm should increase its price.
Answer the following statement true (T) or false (F)