Answer the following statement true (T) or false (F)
1) In maximizing profit, a firm will always produce that output where total revenues are at a
maximum.
2) In the short run, a competitive firm will always choose to shut down if product price is less than
the lowest attainable average total cost.
3) A competitive firm will produce in the short run so long as its price exceeds its average fixed
cost.
4) The short-run supply curve slopes upward because producers must be compensated for rising
marginal costs.
1) F
2) F
3) F
4) T
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Other things being equal, the lower the value of elasticity:
A. the more likely the profitability of a price increase. B. the less likely the profitability of a price increase. C. the greater the responsiveness in quantity demanded to a price change. D. the lower the corresponding increase in firm revenue.
The assumption of rational self-interest means that economic decision makers
a. have no concern for the welfare of others b. consider the welfare of others to be more important than their own happiness c. know with certainty which choice will have the best result d. make reasonable decisions based on their expectations of results e. do not make incorrect decisions or bad choices