Question

In the market for labor:

Multiple Choice

• individuals make up the demand.

• firms create the supply.

• the price in the market is the wage.

• individuals are never paid above their productivity.

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For firms that sell one product in a perfectly competitive market, the market price is:

Multiple Choice

• constant, regardless of quantity sold.

• equal to average revenue for a firm.

• equal to marginal revenue for a firm.

• All of these are true.

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A monopolist can maximize profits by:

Multiple Choice

• selling as much as he can produce.

• producing at the level of output at which MR = 0.

• following the same rules as a perfectly competitive firm.

• selling an output where P = ATC.

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A firm realizes that the market price has fallen below its average total costs, and it is now earning a loss. What is the best action for the firm to take in the short run?

Multiple Choice

• Produce where MC = MR to minimize losses if P > AVC.

• Shut down if price is greater than average variable costs.

• Produce where MC = MR to minimize losses if P < AVC.

• Shut down if total revenue is less than fixed costs.

Answer 1

1- (C)

In the market for labor ,individuals supply the labor, firms demand the labor and price determined in the labor market is wage.

2- (D)

In a perfectly competitive market, P= AR= MR for all the quantities.

3- (B)

A monopolist maximizes profit by producing output where MR = MC.

4- (A)

A firm shuts down only if P< AVC .