Question

II. all statments are False correct them

1)Decreasing returns to scale means that as you add a variable factor of production to a fixed factor of production, increasing average total costs.

2)Average fixed costs fall as output increases because the productivity of labor increases.

3)The opportunity cost of starting a new business is giving up one's free time.

4)If marginal cost is rising, then average variable cost and average total cost must be rising as well. 5)In a perfectly competitive market, if price is above minimum average variable cost, then firms will enter until price is equal to minimum average variable cost.

6)One reason the long run supply curve may be upward sloping is diminishing returns.

7)A firm in a competitive industry is assumed to set their price to cover costs and a normal profit. 8)In a competitive industry, if price is above minimum average total costs then firms will begin to exit until price fall to minimum average variable costs.

9)In a competitive market, a firm is said to shutdown when it is unable to pay its existing debts. 1

0)A monopolist can never earn excess profits over the long run.

11)An example of price discrimination is when a law firm gives its large, corporate customers better service than its smaller clients.

12)If a consumer receives more marginal utility per dollar spend on hamburgers than pizza, then they can make themselves better off by buying more hamburgers and more pizza.

13)The neoclassical vision is that all of economic life can be explained by supply and demand.

14)The great neoclassical economist Alfred Marshall tried to build a new economics by bringing together the Keynesian theory of demand with the classical theory of supply.

15)According to the neoclassical perspective, most jobs are uninteresting and tedious because employers care more about increasing the productivity of their work force than whether or not workers enjoy their jobs.

Answer 1

1)Decreasing returns to scale means if output increases in a diminishing rate than the increase in input for example if input is increased by 3 times but output is reduced 2 times also all the inputs are mobile and used in the long run in returns to scale.

2) False, AFC decreases as output increases because total fixed cost remains the same with changes in output,AFC falls steadily with increase in output.

3) True as one is giving up his leisure time to staart a work

4)when marginal cost is rising then avc and atc is falling

5)Firms will enter if the prices are more than AVC but not enter when P=AVC as it is the shutdown price

6)True as in a competitive world,higher prices have to be paid for the scarce resources to attract them from other uses so that production in the industry can be increased.

7)A business cannot set their prices in a competitive market and it is set by the market forces of demand and supply

8)False,if prices are above AVC then firm will keep producing as they can still recover their variable cost.

9)False, a firm is said to shutdown when P= minimum of AVC

10)True, in the long run,new firms will enter the market which will lead to an increase in supply of differenciated products leading to decrease in market share and profits.

11)True

12)If one gets more MU per dollar spent on hamburgers than pizza then it would make sense more of hamburgers until MU of one more unit of hamburger gives less utility than it's price due to law of diminishing MU.

13)True

14)False,Keynes was a student of Alfred Marshall and Alfred's work extensions of Adam smith and mill

15)False, neoclassical