Consider a firm operating in a perfectly competitive market. At its current output of 200 units, marginal revenue is $28 . At this output, average total cost is minimized and equals $25 . Given this information, what should the firm do?
a. Continue to produce 200 units, since costs per unit are minimized
b. Increase output beyond 200 units, since this higher output will yield the profit maximizing output level.
c. Decrease output below 200 units, since this lower output will result in the profit maximizing output level.
d. More information is needed to determine the firm's next step.
b
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If a firm experiences constant returns to the variable input in the short run:
A) marginal product will be greater than average variable product, but the two will become more equal as output increases. B) marginal product will be less than average variable product, but the two will become more equal as output increases. C) marginal product will be greater than average variable product, and the difference between the two will become larger as output increases. D) marginal product and average variable product will be equal over the range of output in question.
Experimental effects, such as the Hawthorne effect,
A) generally are not germane in quasi-experiments. B) typically require instrumental variable estimation in quasi-experiments. C) can be dealt with using binary variables in quasi-experiments. D) are the most important threat to internal validity in quasi-experiments.