Question

In: Economics

1- For a perfectly competitive firm, marginal revenue: is less than price. is equal to price....

1- For a perfectly competitive firm, marginal revenue:

is less than price.

is equal to price.

decreases as the firm increases output.

is greater than price.

2-Which of the following are characteristics of a monopoly market structure?

In a monopoly,

there is only one firm in the industry.

no close substitutes are available.

firm(s) have little to no price-setting power.

there are low barriers to entry into the market.

3-You own a small deli that sells sandwiches, salads, and soup. Which factor is an implicit cost of the business?

bread, meat, and vegetables used to produce the items on your menu

the job offer you did not accept at a local catering service

wages paid to part-time employees

your monthly utility bill

Solutions

Expert Solution

1. Is equal to price

For a perfectly competitive firm marginal revenue is equal to price because firms perfectly competitive market are price taker. This means the firm can sell any amount of the commodity at the prevailing market price. The price remains constant and therefore price is equal to marginal revenue.

2. There is only one firm in the industry and no close substitutes are available

Monopoly refers to a market in which there is a single seller or firm of a product with no close substitutes in the market. The monopoly firm has full price setting power and hence the firms are price maker. The reason behind only one firm is that there is high barriers on the entry of new firms.

3. The job offer you didn't accept at a local catering service

Implicit cost is the opportunity cost of using self owned inputs. Opportunity cost is the cost of next best alternative foregone. So the job offer you did not accept at a local catering service is tha opportunity cost of owning a small deli that sell sandwiches, salads and soups.


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