Question

1 The revenue that a firm in perfect competition receives for each additional unit:

is sometimes below and sometimes above the selling price.

increases as the firm's output increases.

decreases as the firm's output increases.

is constant.

2 A new production technique has been developed which significantly increases output per worker. As a result, the firms':

average cost curves become downward sloping.

long-run average cost curve becomes flatter.

average cost curve shifts downward.

cost curves do not change their shape or position.

12

The root-mean-square error is a measure of

moving average periods

exponential smoothing

incorrect data measurement

forecast accuracy

Answer 1

1. Option D is constant

The marginal revenue curve shows the additional revenue gained from selling one more unit. A firm in perfect competition faces a perfectly elastic demand curve for its product, the firm’s demand curve is a horizontal line drawn at the market price level. This also means that the firm’s marginal revenue curve is the same as the firm’s demand curve. Every time a consumer demands one more unit, the firm sells one more unit and revenue goes up by exactly the same amount equal to the market price.

2. Option C

Average cost curve shifts downward.

With a better technology, the same inputs can produce
more output, so an advance in technology lowers the
average and marginal costs and shifts the short-run
cost curves downward.

3.Option D forecast accuracy

RMSD is a measure of accuracy, to compare forecasting errors of different models for a particular dataset and not between datasets, as it is scale-dependent.