Question

In: Economics

The marginal cost of producing a given quantity is always at least as big in the short run as it is in the long run.

True/False/Uncertain: Justify your answers using two or three sentences (at most) for each part.

a.

Imperfect competition in the labor market will change the combination of labor and capital each firm uses to produce, but will not change the quantity each firm produces, compared to the case of perfect competition.

b.

The marginal cost of producing a given quantity is always at least as big in the short run as it is in the long run.

Solutions

Expert Solution

a. Imperfect competition in the labor market will change the combination of labor and capital each firm uses to produce, but will not change the quantity each firm produces, compared to the case of perfect competition.

False, Imperfect competition does not involve perfect information and wages for labors, prices of products and output can be different. Each firm produces as per its profitability and quantity produced will depend upon the costs of factors of production for that company.

b. The marginal cost of producing a given quantity is always at least as big in the short run as it is in the long run.

False, In the short run, at least one factor of production remains constant and in the long run all factors are variable. The shape of the cost curves in the short run reflect the law of diminishing returns. It is possible that the marginal cost of producing a given quantity is different in the short run as it is in the long run.

Rahul Sunny answered 2 years ago
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