Question

52-54

52. Adam's Apples, a small firm supplvine apples in a perfectly competitive market, decides to cut its production to half this year. Which of the following is likely to occur in this case? a. The market price of apples will increase. b. The market price of apples will decrease. c. The market demand for apples will increase. d. The market price of apples will not be affected. e. The market supply curve of apples will shift rightward. 53. Suppose the marginal cost for the 1,000unit of a monopolist's output is $40, marginal revenue is $30, the average variable cost of producing 1,000 units is $30, and the average total cost is $50. In order to maximize profit or minimize loss in the short run, the firm should a. shut down b. continue to produce 1,000 units. c. produce fewer than 1,000 units but still operate. d. produce more than 1,000 units. e increase its plant size to gain economies of scale. 54. Consider two resource markets, A and B, where the demand curves for the resources slope downward. The supply curve of resource A is horizontal, and the supply curve of resource B is vertical. In market A, the equilibrium price is $6, and the equilibrium quantity is 100 units. In market B, the equilibrium price is $20, and the equilibrium quantity is 30 units. Which of the following is true? a. All of the resource earnings in market A are opportunity costs. b. All of the resource earnings in both markets are opportunity costs. c. All of the resource earnings in market B are opportunity costs. d. None of the resource earnings in either market are an opportunity cost. e. None of the resource earnings in either market are economic rent.

Answer 1

52 Decision to cut the production of Apple by half shifts the more Supply curse of apple to the left. Thits of yle 1. E. de - OD Qty al pole The market price of apple will inerende from Po to ? (a) induce ophum (a) 53 at lourth unit , monipulist • MC is $40 and MR is $30 Since MCY MR et a=low. & Monopoly should produce fewer than sow unit so that tim uchere the reach the point MR = NC. NR luo Answer: ophon (C).

DELIA R Morket Maro $ 54 soby 100 due Supply curve rept represent the opportunity cost of resources. In market a Supply curve is horzenial at Price = 16, implies all of the resources carning in market A are opportunity cost. Answeri ophon (A)