If a firm sets marginal revenue equal to marginal cost it will make an economic profit
Indicate whether the statement is true or false
False . When a firm sets MR = MC it maximizes profits but the profit-maximizing level of output might still be negative (the smallest loss possible).
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"It is clear from the theory of monopolistic competition that product development is not pushed to its efficient level." This statement is
A) false because there is so much product differentiation in monopolistic competition. B) true because there is little incentive to innovate in monopolistic competition. C) false because there are so many wasteful innovations in monopolistic competition that are merely cosmetic. D) true because price exceeds marginal revenue in monopolistic competition.
Which of the following arguments is not generally made to justify farm subsidies?
A. The "family farm" is an American institution that should be protected and nurtured. B. Agribusiness firms need subsidies to achieve economies of scale. C. Farmers sell their output in purely competitive markets but must buy inputs from imperfectly competitive firms. D. Farmers cannot fully insure themselves against the risks unusual to farming, such as floods, droughts, and pests.