Question

Why is the marginal cost curve for a firm typically assumed to be upward sloping?

a.An assumption of constant marginal returns to production

b.An assumption of diminishing marginal returns to production

c.An assumption of increasing marginal returns to production

d.An assumption of negative marginal returns to production.

In which type of market are firms best able to earn economic profits?

a.Oligopoly

b.Monopolistic competition

c.Perfect competition

d.Monopoly

Consider a short-run PC market where firms are earning positive economic profit. In the long-run, we would expect:

a.Firms to enter this market, drive price down, and keep economic profit just above zero

b.Firms to enter this market, drive price down, and earn zero economic profit

c.Firms to exit this market searching for higher profit, driving price down and decreasing profit for the firms that stay

d.Firms to exit this market searching for higher profit, driving price up and increasing profit for the firms that stay

Answer 1

1) An assumption of diminishing marginal returns to production

option(B)

2) Monopoly

option(D)

3) Firms to enter this market, drive price down, and earn zero economic profit

option(B)