Question

In: Finance

2) X-inefficiency refers to the situation in which: A) highly competitive firms have less incentive to...

2) X-inefficiency refers to the situation in which:
A) highly competitive firms have less incentive to minimize their costs of production than other firms because the highly competitive firms have almost no chance to earn above-average profits.
B) firms are unable to minimize their costs of production because there is no potential for input substitution.
C) firms that use labor-intensive production methods tend to be less efficient than firms that use capital-intensive production methods.
D) firms with market power have less incentive to minimize their costs of production than more competitive firms.
Answer:
3) Economies of scale are illustrated by:
A) a downward sloping long-run average cost curve.
B) a flat long-run average cost curve.
C) an upward-sloping long-run average cost curve.
D) a downward-sloping short-run average total cost curve.
Answer:
5) Isoquants are convex to the origin due to:
A) the law of diminishing marginal utility.
B) the assumption of the diminishing marginal productivity of each input.
C) the fact that as less capital is used, its marginal productivity falls.
D) the fact that as more labor is used, its marginal productivity rises.
Answer:
6) Which of the following is not a characteristic of perfect competition?
A) Large number of firms in the industry.
B) Outputs of the firms are perfect substitutes for one another.
C) Firms face downward-sloping demand functions.
D) No barriers to entry or exit.
Answer:
7) In the case of the perfectly competitive firm:
A) marginal revenue equals the market price.
B) marginal revenue is greater than the market price.
C) marginal revenue is less than the market price.
D) marginal revenue is equal to, less than, or greater than market price depending on the level of output.
Answer:

Solutions

Expert Solution

2. Option D. firms with market power have less incentive to minimize their costs of production than more competitive firms

3. Option C. an upward-sloping long-run average cost curve

5. Option B. the assumption of the diminishing marginal productivity of each input

6. Option C. Firms faces downward-sloping demand curve

7. Option A. marginal revenue equals the market price

jeff jeffy answered 2 years ago
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