Question

44. Under both perfect competition and monopoly, a firm: a. is a price taker. b. is a price maker. c will shut down in the short-run if price falls short of average total cost d. always earns a pure economic profit. e.) sets marginal cost equal to marginal revenue. 45. True/False. In the long run, all inputs AND costs are variable. a. True b. False 46. True/False. Marginal cost is calculated by dividing the change in total cost by the change in total output. a. True b. False 47. True/False. Suppose Joe Rich owns his own company and does not pay himself a salary. This means the salary he could have earned in alternative employment is considered an implicit cost for the firm. a. True b. False 48. True/False. A perfectly competitive market is characterized by highly advertised goods. a. True b. False 49. True/False. A perfectly competitive firm will shut down in the short-run when marginal revenue equals marginal cost at a price less than minimum average variable cost. a. True b. False 50. True/False. The short-run supply curve and short-run marginal cost curve for a perfectly competitive firm coincide when the market price is greater than average variable cost. a. True b. False

Answer 1

Solution:

44) Under both perfect competition and monopoly,

(e) a firm sets marginal cost equal to the marginal revenue.

Because under both market forms MR=MC is the equilibrium condition.

45) In the long-run, all inputs and costs are variable

(a) True

Because, in the long run nothing is fixed, neither the inputs nor the costs incurred on them.

46) Marginal cost is calculated by dividing the change in total cost by the change in total output

(a) True

Marginal cost is the additional cost due to additional unit of output produced

47) (a) True

Because Joe Rich didn't receive any payment for his services. This is also called implied cost.