Question

In: Economics

The most efficient production occurs where MC=AC (where AC is minimum). Therefore, a firm with many...

The most efficient production occurs where MC=AC (where AC is minimum). Therefore, a firm with many plants will make sure to have each of them produce at their minimum AC. True, False, Explain.

Solutions

Expert Solution

It is a true statement for a perfect competition market. In a peerfect competition market, the individual firms will get the equilibrium output where the marginal revenue is equal to the marginal cost and also the marginal cost is equal to the minimum point of average cost. This is nothing but represeting that all the firms in the industry gets normal profits. If the average cost is equal to the minimum point of average revenue at the efficient producation point the firms tends to get only normal profits. In long run perfect competition market, all the firms get normal profit because of free entry and free exit condition. If the firms gets supernormal profits in the long run it will attract other firms to enter into the industry because of this the supply increases and the price comes down. In constrast if the they are getting losses some of the firms leave the industry becasue of this the supply decreases and price increases. Because of this in long run all the firms gets only normal profits.

Hence the statement given is true if the market is a perfect competition market.


Related Solutions

For a perfectly competitive firm, if MC = minimum ATC, then:
For a perfectly competitive firm, if MC = minimum ATC, then:
Much of the research on the minimum efficient scale suggests that for many firms the LRAC...
Much of the research on the minimum efficient scale suggests that for many firms the LRAC curve is: A) downward sloping over the relevant range of output. B) upward sloping over the relevant range of output. C) U-shaped. D) flat over a relatively large range of output levels. 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...
1. A Pareto efficient allocation of resources occurs where: a. no individual can be made better...
1. A Pareto efficient allocation of resources occurs where: a. no individual can be made better off without making another worse off. b. there is justice in the distribution of income and wealth MSB>MSC c. MSB>MSC d. all of the above 2. A public good is: a) Any good traded in markets b) A good that is non-excludable and non-rival in consumption c) A good provided only to those who pay for it d) Rarely provided by the government
The most common sampling method is the convenience sample; therefore, many of the studies that you...
The most common sampling method is the convenience sample; therefore, many of the studies that you find for evidence use this sampling method. What are the implications for using a convenience sample on the way you interpret and use the findings?
1. The minimum efficient scale of production is such that an industry has only four large...
1. The minimum efficient scale of production is such that an industry has only four large firms. This would be termed ____________. A. a four-firm industry B. an oligopoly C. a cartel D. a natural monopoly 2. In an oligopoly with a few large firms, which of the following is true? A. Each firm has independent control over the price it sets. B. Firms are interdependent. C. Firms fail to try to maximize profits. D. Each firm adjusts its price...
The long-run cost curve for a typical perfectly competitive firm in the tea market is given by the following: MC=AC=40
Show all your calculations. Answers without explanations or calculations will receive a mark of zero. The long-run cost curve for a typical perfectly competitive firm in the tea market is given by the following: MC=AC=40 The market demand curve for tea is given by the following: P = 400 – 2Q a) Find the long-run competitive equilibrium assuming the industry is constant-cost. That is, identify the equilibrium price, total quantity produced and output of each firm if there are 10...
ESTROUS CYCLE: In animals using estrous cycles, proestrus occurs before the estrus phase. Proestrus therefore most...
ESTROUS CYCLE: In animals using estrous cycles, proestrus occurs before the estrus phase. Proestrus therefore most closely corresponds to which uterine or ovarain phase(s) in humans? Group of answer choices follicular phase and ovulation secretory phase ovulation and luteal phase proliferative phase menses
If a firm is producing its output where MR=MC, but is suffering (economic) losses, then it...
If a firm is producing its output where MR=MC, but is suffering (economic) losses, then it must be the case that a) price is less than average total cost. b) price exceeds marginal cost. c) price is less than average variable cost. d) price equals marginal revenue.
In the long run the perfectly competitive Firm will produce the allocative efficient quantity of a Product and the production efficient quantity of the Product
In the long run the perfectly competitive Firm will produce the allocative efficient quantity of a Product and the production efficient quantity of the Product, although their goal is to produce a profit Maximizing or loss minimizing quantity of a product
1)If a perfectly competitive firm is producing a quantity where P < MC, then profit: Group...
1)If a perfectly competitive firm is producing a quantity where P < MC, then profit: Group of answer choices a)can be increased by increasing production. b)is maximized. c)can be increased by decreasing the price. d)can be increased by decreasing production. 2)Which of the following accurately explains why firms in perfectly competitive markets are price takers? Group of answer choices a)prices in perfectly competitive markets are set by government regulation. b)prices in perfectly competitive markets are determined by the costs of...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT