Answer the following statement(s) true (T) or false (F)
1. Cost-effectiveness requires that resources are allocated such that the additional benefits to society are equal to the additional costs.
2. Assume that the marginal revenue associated with the 12th unit of output is $25 and the marginal cost is $14. As a result, the firm should produce more, because the marginal profit at that output level is greater than zero.
3. When a profit-maximizing firm increases output to Q = 50, its MR= $100 and MC = $124, meaning that total profitfalls by $24, so the firm should contract production.
4. In perfect competition, the firm faces a perfectly inelastic demand.
5. The demand faced by the perfectly competitive firm is perfectly elastic, meaning that price and marginal revenue are equal.
1. False
2. True
3. True
4. False
5. True
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When the Federal Reserve lends reserves to depository institutions, it charges them interest. That interest rate is called the
A) federal funds rate. B) loan rate. C) prime rate. D) discount rate.
Refer to Figure 4-3. What area represents producer surplus at the equilibrium price of P1?
A) D + E B) D + E + G + H C) A + B + C + D + E D) A + B + D