Question

In: Economics

17. If the price is P2, then the firm will choose to produce where the price...

17. If the price is P2, then the firm will choose to produce where the price is equal to ATC. A) True B) False 18. Curve ____ is the ____, and a competitive market price equal to ____ would be ____. A) N; ATC; P2; the break-even price B) O; AVC; P1; the break-even price C) O; AVC; P2; the shut-down price D) N; AVC; P3; the shut-down price 19. The firm in a competitive market will make a positive level of profit if they choose to produce q2 when the price is P3. A) True B) False 20. The slope of the total cost curve is: A) marginal cost. B) marginal revenue. C) constant under perfect competition. D) always negative. 21. In consumer equilibrium, the consumer's substitution ratio for two goods equals the price ratio of the two goods. A) True B) False

Solutions

Expert Solution

17)True, ATC IS addition of vc and fc

And the relation between Mc and ATC

  • Ac falls Mc is less than Ac
  • Ac is constant Mc =qc
  • Ac rises MC greater than Ac

Mc is u shaped curve indicates that Mc falls in beginning then remain constant and thn rises reason operation of law of variable proportion.indicates

18)curve is 1 rising in starting then constant and thn fall

19)True.. Market is in compition only In case of perfect and monopolistic.

IN case of perfect competition market Expanding production into the zone where MR < MC reduces economic profiy Because the marginal revenue received by perfectly competition market iss equal to the price P, we can also write the profit-maximizing rule for a perfectly competitive firm as a recommendation to produce at the quantity of output where P = MC.

20)slope of total cost curve is marginal cost because of u shaped. U shaped ndicates that Mc falls in beginning then remain constant and thn rises reason operation of law of variable proportion.

21)True, consumer equilibrium is a situation under which he spend his given income on purchase of commodity in such a way that give maximum satisfaction.

Consumer equilibrium in case of single commodity


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