Question

In: Economics

Analyze and then classify the statements as TRUE or FALSE. 1. The average fixed cost always...

Analyze and then classify the statements as TRUE or FALSE.

1. The average fixed cost always has a negative slope.

2. The average fixed cost is always lower than the average total cost.

3. When there are constant returns to scale the slope of the Long-run Average Cost curve is zero.

4. Marginal product and marginal cost have an inverse relationship.

5. The marginal cost curve will intersect the average variable cost curve at a lower value of quantity of output than it will intersect the average total cost curve.

6. In the long-run all inputs of production are variable.

7. In the short-run the average total cost curve is fixed.

8. The average variable cost curve may fall (have a negative slope) even when the marginal cost curve is rising.

9. The marginal cost curve intersects both the average variable cost curve and the average total cost curve at each one’s minimum value.

10. If MC > ATC, then ATC is rising.

11. If MC > AVC, then AVC is rising.

12. It is possible for the AVC to be increasing when the ATC is decreasing.

13. It is possible for the MC curve to be rising while both the AVC and ATC are falling.

MULTIPLE CHOICE:

14. Which of the following does NOT describe perfect competition?

A. A large number of buyers and sellers with no single buyer or seller having power to influence the price of the good being sold.

B. Sellers are price takers.

C. The characteristics of the product vary significantly from one producer to another.

D. Entry into the market requires a relatively low level of capital investment and exit from the market is also relatively easy.

E. None of the above.

TRUE or FALSE:

15. When a firm makes a normal profit its economic profit is zero.

16. When a firm makes a normal profit its average total cost is equal to average total revenue.

17. Given a firm is operating in a perfectly competitive market and it is making a normal profit then we can conclude that its marginal cost is equal to marginal revenue

Expert Solution

Rahul Sunny answered 2 years ago

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