Question

53

If we drew a graph where the market price, marginal cost, & the Average Total Cost all intersected at one point, then we would be correct to say that this point represents the economic breakeven point.

True or False

54

If the income elasticity for a product was calculated to be a negative -0.50, then you are probably dealing with an inferior good rather than a necessity.

True or False

55

How do we know that we have a situation of “Diseconomies of Scale?”

Multiple Choice

• The Marginal Cost Curve shifts up as production expands

• The Long-Run Average Total Cost Curve curves up as production expands

• The Long-Run Average Fixed Cost Curve shifts up as production expands

• Economics is driving me crazy

56

If a U.S. business owner operating in a foreign country is forced to pay illegal bribes to corrupt government officials, then according to microeconomic theory those bribery payments would be classified as an “implicit cost.”  

True or False

Answer 1

1) True, Break even point is the point at which marginal cost equal to average total cost. Also when price crosses this point then that price is called break even price because the marginal revenue will exactly offset the marginal cost of production. Also at  this point not be earning any profits.

So, the given statement is TRUE.

2) TURE, if income elasticity is negative then it means increase in income will lead to decline in demand. And inferior goods also states that income and demand of good has negative relation so this elasticity is dealing with inferior goods. Neccessary goods has less than 1 income elasticity not negative.

So this statement is TRUE.

3) Diseconomies of scale states that when long run average cost increases as level of output increase . Also it is opposite of economies of scale.

So option (B) is correct answer. I.e The Long-Run Average Total Cost Curve curves up as production expands.

4) False, because according to implicit cost also called is an imputed cost and payment is not made other. But in this example pay to other corrupt govt. Official so according definition it is not implicit cost.

So this statement is FALSE.