Do you agree or disagree with each of the following statements? Explain your reasons. a. For a competitive firm facing a market price above aver-age total cost, the existence of economic profits means that the firm should increase output in the short run even if price is below marginal cost.b. If marginal cost is rising […]

When an economy dips into a recession, consumers will often be relatively pessimistic about the future for an extended period of time. How will this pessimism affect the speed and strength of the recovery? Feel free to use the data of Exhibit 2 in your response to this question. Discuss. Sample Solution The post Recession

For each of the following, decide whether you agree or disagree and explain your answer: a. A firm earning positive profits in the short run always has an incentive to increase its scale of operation in the long run.b. A firm suffering losses in the short run will continue to operate as long as total

For cases A through F in the following table, would you (a) operate or shut down in the short run and (b) expand your plant or exit the industry in the long run?

You are given the following cost data: If the price of output is $12, how many units of output will this firm produce? What is the total revenue? What is the total cost? Will the firm operate or shut down in the short run? In the long run? Briefly explain your answers.

For each of the following, decide whether you agree or disagree and explain your answer: a. Firms that exhibit constant returns to scale have U-shaped long-run average cost curves.b. Firms that exhibit increasing returns to scale are on the part of the long-run average cost curve that is upsloping.

Explain why it is possible that a firm with a production function that exhibits increasing returns to scale can run into diminishing returns at the same time. One of the more recent innovations in computer technology is called “cloud computing.” With cloud computing, information and software are provided to computers on an “as-needed” basis, much

The Languedoc-Roussillon region, southern France, is the home to three vineyards. Château Beauregard Mirouze produces 2,500 bottles of wine per month at a total cost of €40,000. Châteaude Bruthel produces 1,500 bottles of wine per month at a total cost of €27,000. Châteaude l’Esparrou produces 4,000 bottles of wine per month at a total cost

The concept of economies of scale refers to lower per-unit production costs at higher levels of output. The easiest way to understand this is to look at whether long-run average cost decreases with output (economies of scale) or whether long-run average cost increases with output (diseconomies of scale). If average cost is constant as out-put

The long-run average cost curve for an industry is rep-resented in the following graph. Add short-run average cost curves and short-run marginal cost curves for three firms in this industry, with one firm producing an output of 10,000 units, one firm producing an output of 20,000, and one firm producing an output of 30,000. Label