Suppose that a firm operating in perfectly competitive market sells 200 units of output at a price of $3 each. Which of the following statements is correct? (i) Marginal revenue equals $3. (ii) Average revenue equals $600. (iii) Average revenue exceeds marginal revenue, but we don't know by how much

As output increases, marginal cost will eventually

A) increase because of the law of increasing returns. B) increase because of the law of diminishing returns. C) decrease because of the law of diminishing returns. D) decrease because of the law of increasing returns.

The substitution effect of a real wage increase is observed when

A) the higher wage causes workers to take more leisure and work more hours. B) the higher wage causes workers to take more leisure and work fewer hours. C) leisure's higher opportunity cost causes workers to take less leisure and work more hours. D) leisure's higher opportunity cost causes workers to take more leisure and work fewer hours.