Problem_set_70

Problem_set_70 - Econ 1, Winter 2010, UCSD Problem Set 7...

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Econ 1, Winter 2010, UCSD Problem Set 7 Important terminology to review well (see the margins of Chapters 6 and 7 or the book’s index): Profit, profit-maximizing firm, perfectly competitive market, price taker, imperfectly competitive firm, factor of production, short run, long run, law of diminishing returns, fixed/variable factor of production, fixed/variable cost, total cost, marginal cost, average variable cost (AVC), average total cost (ATC), profitable firm, producer surplus. TRUE/FALSE QUESTIONS: 1. If MR = MC, then TR and TC differ by a maximum if positive profits are earned. 2. ATC always exceeds AVC. 3. If TR > TC, the firm should produce more of whatever it is producing. 4. Profit maximization can occur at some output level where marginal cost and marginal revenue are not equal. 5. Because its market share is insignificant, a perfectly competitive firm faces an inelastic demand curve. 6. A perfectly competitive firm’s long-run supply curve is that part of its MC curve that lies above the point where MC = AVC. 7.
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Problem_set_70 - Econ 1, Winter 2010, UCSD Problem Set 7...

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