Question

1.) Why does a long-run average cost curve with a clear minimum point allow fewer firms to compete?

Select the correct answer below:

a. any firm producing at a different quantity from a clear minimum point will have higher costs.

b. any firm that produces the same quantity from a clear minimum point will have higher costs.

c. any firm producing at a different quantity from a clear minimum point will have lower costs.

d. any firm that produces the same quantity from a clear minimum point will have lower costs.

2.) Examples of explicit costs include __________.

Select all that apply:

• an out of pocket cost

• rent

• opportunity costs

• salary and wages

3.) Which statement is true about the relationship between elasticity and its slope?

Select the correct answer below:

a. The slope of either the supply or demand curve defines its elasticity.

b. The elasticity is a constant rate along the curve, while the slope changes along the curve.

c. Elasticity is the rate of change in units along the curve, or the rise/run (change in y over the change in x). The slope changes along this curve.

d. Elasticity is the percentage change, which is a different calculation from the slope.

4.) Which of the following are consequences of a significant increase in production due to advances in technology in a market with inelastic demand?

Select the correct answer below:

a. The lower costs of production will benefit neither consumers nor producers.

b. The fall in production costs will decrease supply.

c. The lower costs of production will give a greater benefit to consumers than producers.

d. The lower costs of production will give a greater benefit to producers than consumers.

Answer 1

4) ans is C. Increase in technology will lead to lower  cost of production which increase supply and shift the supply curve to the right. This increase in supply will decrease price at a larger extent because of inelastic demand. Thus consumer benefits more.

3)D. Elasticity is the % change where as slope is the absolute change

2)Ans is A(If only one has to be selected). Explicit cost is the total cost incurred in buying the goods from the market.

Rent, wages and salaries can be the part of explicit cost if they are paid.

1)A. Any different quantity produced will have larger cost but profit is maximised when MR=MC