We assume that firms, when they are deciding the best rate of output at which to produce
A. want to minimize costs.
B. try to get the highest price possible.
C. want to maximize profits.
D. want to maximize sales.
Answer: C
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Suppose two goods (x and y) are being produced efficiently and that the production of x is always more labor intensive than the production of y. Production depends only on two factors (capital and labor); these may be smoothly substituted for each other. The total quantities of these inputs are fixed. An increase in the production of x and a decrease in the production of y will:
a. increase the capital-labor ratio in each firm. b. decrease the capital-labor ratio in each firm. c. leave the capital-labor ratio for each firm unchanged. d. increase the capital-labor ratio in y production and decrease the capital-labor ratio in x production.
Monopolistic competition is characterized by: a. a small number of firms selling differentiated products. b. a large number of firms selling identical products
c. high barriers to entry. d. a large number of firms selling differentiated products.