Describe the graph for a long-run supply curve in a decreasing-cost industry. Why does it have this slope?
What will be an ideal response?
For the graph, quantity or output for the industry will be on the horizontal axis and price will be on the vertical axis. The slope of the graph for a long-run supply curve in a decreasing-cost industry will be down sloping. It shows that shows an increase in the level of output is associated with a decrease in the price of the product. The reason for the downward slope is that as firms increase output, they demand more resource inputs. The increased demand for resource inputs gives firms the opportunity supplying those inputs to achieve more economies of scale and thus reduce the resource prices. As the resource price falls, this decreases the minimum average total cost of the product for firms in the industry.
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A firm sells 20 units of a good at a price of $5 per unit. If the average cost of production of the good equals $3 per unit, the firm's revenue is:
A) $40. B) $60. C) $100. D) $120.
Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:
A. the opportunity cost of attending State U. includes the sum of the benefits Alex would had from attending each of the other schools to which he was admitted. B. Alex has no incentive to study hard while at State U. C. the opportunity cost of attending State U. includes the money Alex could have earned working for four years. D. attending State U. for four years is costless for Alex.
When the Federal Reserve purchases treasury securities in the open market,
A. The sellers of such securities by new securities in the open market and there is an increase in bank reserves B. The sellers of such securities deposits the funds in their banks and bank reserves increase C. The buyers of those securities pay for them with checks drawn on their bank account and bank reserves increase
Suppose that Techno TV produces LCD televisions. At a price of $2,000 per television, Techno determines that its optimal output is 3,000 television sets per week. If prices are sticky and fears of a recession reduce demand for LCD televisions, we would
expect Techno to: A. reduce output in the long run. B. reduce output in the short run. C. raise prices in the short run to compensate for lost revenue. D. lower prices in the short run to offset the reduced demand.