Question

52. Adam's Apples, a small firm supplying 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 1,000 unit 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. Page 19 Coping Corse La Posted by Choo

Question #54, please advise

Answer 1

54.

Ans: a.

Explanation: Supply curve (is the MC curve) shows minimum price for which output can be supplied. if supply curve (MC) is horizontal, demand supply equilibrium occurs at same price level at which supply (MC) is horizontal. This implies that Price = MC = AC and zero profit.