Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $12; AVC = $10; MC = $15; MR = $16. The firm should
A) increase output.
B) decrease output.
C) increase price.
D) change nothing.
Answer: A
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As a consumer spends a larger share of his income on a particular good, the price elasticity of demand for that good:
A) increases. B) decreases. C) initially decreases then increases. D) remains the same.
Refer to the table above. Which of the following statements is true of the monopolist's marginal revenue?
A) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue decreases. B) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue increases. C) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue first increases then decreases. D) As the monopolist reduces the price of its product from $9 to $3, the marginal revenue first decreases then increases.