If a firm is a profit maximizer and faces positive marginal costs,
A) there is a natural limit to the size of the firm, where MR = 0.
B) there is no natural limit to the size of the firm; it can be as large as it wants to be.
C) there is a natural limit to the size of the firm, where MR > 0.
D) there is no natural limit to the size of the firm, hence the need for government regulation.
C
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If the natural monopoly shown in the figure above is unregulated, it will sell
A) 2 million units. B) 3 million units. C) 4 million units. D) 5 million units.
Which of the following helps to explain why the supply curve of labor is upward sloping?
A) The substitution effect of a price change makes a good more expensive relative to other goods. B) The supply curve of labor is a derived supply curve; since the output supply curve is upward-sloping so is the labor supply curve. C) As the wage rate rises, the income effect causes the quantity of labor supplied to increase. D) As the wage rate rises, the opportunity cost of leisure rises.