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Unformatted text preview: run, you can avoid diminishing marginal product of labor by adding more capital. 4. If the price is constant (say $5), then the next unit you sell will be at $5 (so, MR=$5). Also, if all units are sold at $5, then the average is $5 (Average Revenue=$5) 5. Too many small firms with little market share selling homogeneous goods. 6. Firms do not want to operate on the decreasing returns to scale portion of the LRAC. If the DRS occurs at a low output quantity, then firms will stay small. However, if DRS doesn’t occur until a much higher output , then firms will be bigger. Section 2 1. A. 50 units, $100 profit. (set MR=MC to find optimal quantity); B. 30 units , $60 profit 2. A. 400 units, $10,000 profit; B. 6 units, $120...
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This note was uploaded on 12/03/2011 for the course ECON 101 taught by Professor Flah during the Spring '10 term at Punjab Engineering College.
- Spring '10