Question

7. a rising average cost implies that

a) a marginal cost is equal to average cost

b) a marginal cost is above average cost

c) a marginal cost is below average cost

d) all of the above

11. decreasing average cost implies that

a) marginal cost is above average cost

b) marginal cost is below average cost

c) marginal cost is equal to average cost

d) none of the above

12. in a market where the equilibrium price is $7, any price higher than $7 would cause

a) a balanced demand and supply

b) a surplus

c) a shortage

d) none of the above

13. competitive firms can earn positive profits in the

a) long run only

b) long run and the short run

c) short run only

d) all of the above

Answer 1

Q7

Answer

Option b

b) a marginal cost is above average cost

the average cost is the cost per unit and marginal cost is the cost of the next output so the average decreases if the additional observation is less than it and increases if above it in the same way,

MC<ATC if ATC is falling

MC>ATC if ATC is rising

MC=ATC if ATC is minimum.

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Q11

Answer

Option b

b) marginal cost is below average cost

the average cost is the cost per unit and marginal cost is the cost of the next output so the average decreases if the additional observation is less than it and increases if above it in the same way,

MC<ATC if ATC is falling

MC>ATC if ATC is rising

MC=ATC if ATC is minimum.

Q12

Answer

Option b

a surplus

P>equilibrium P then

Qd<Qs

surplus =Qs-Qd

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Q13

Answer

Option c

c) short run only

Competitive frim can make profits in short run and zero profit in the long run.