Chapter 23 T or F Flashcards
A firm in a competitive industry takes account of the fact that the demand curve it confronts has a significant negative slope.
F
In a perfectly competitive industry, the demand curve for the total output of the industry may be downward sloping.
T
Price equals marginal cost is a sufficient condition for profit maximization.
F
A firm faces competitive markets both for its inputs and its outputs. If its long run supply curve is q = 3p, then it can not have constant returns to scale.
T
A firm with the cost function c(y) = 20y² + 500 has a U-shaped cost curve.
T
Mr. O. Carr has the cost function c(y) = y² + 144 if his output, y, is positive and c(0) = 0. If the price of output is 30, Mr. Carr’s profit-maximizing output is zero.
F
Mr. O. Carr has the cost function c(y) = y² + 36 if his output, y, is positive and c(0) = 0. If the price of output is 18, Mr. Carr’s profit-maximizing output is zero.
F
A firm produces one output, using one input, with the production function f(x) = 2x^(1/3) where x is the amount of input. The cost function for this firm is proportional to the price of the input times the cube of the amount of output.
T
A competitive firm has a continuous marginal cost curve. It finds that as output increases, its marginal cost curve first rises, then falls, then rises again. If it wants to maximize profits, the firm should never produce at a positive output where price equals marginal cost and marginal cost decreases as output increases.
T
Two firms have the same technology and must pay the same wages for labor. They have identical factories, but Firm 1 paid a higher price for its factory than did Firm 2. If they are both profit maximizers and have upward sloping marginal cost curves, then we would expect Firm 1 to have a higher output than Firm 2.
F
The area under the marginal cost curve measures total variable costs.
T
Average fixed costs never increase with output.
T
The change in producer’s surplus when the market price changes from p1 to p2 is half of the area to the left of the marginal cost curve between p1 and p2.
F
