Please give a short 1 line explanation... Please give a short 1 line explanation
ID: 1243926 • Letter: P
Question
Please give a short 1 line explanation...
Please give a short 1 line explanation...
3. The profit-maximizing condition for a perfectly competitive firm is B. MR AVC D. P AVC. 4. If a perfectly competitive firm finds that price is less than average variable cost it should A. not adjust output if marginal cost equals price. B. shut down immediately. C. increase output until price equals marginal cost. MC D. decrease output until price equals marginal cost. ATC 5. Refer to the graph on the right The perfectly competitive firm depicted is currently: AVC A. earning positive economic profit B. earning zero economic profit C. incurring a loss, but the loss is smaller than the firm's total fixed cost D. incurring a loss that is larger than total fixed cost, so the firm should shut downExplanation / Answer
1.) A.) It is economies of scale because it shows that if you increase the inputs a certain percentage (in this case designing more parts of the car), you increase the output by a greater percentage (shown by the price going down). In diseconomies of scale, the car would cost more, and in constant returns to scale, the car would cost the same. And diminishing marginal product is not relevant to the question.
2.) D.) In a competitive market, we can assume that every product is identical, which we cannot assume on eBay. A is wrong because in a perfectly competitive market, there is an infinite number of sellers, because no single seller can affect the price. In this way, eBay is like a competitive marketplace. B is wrong because those small sellers cannot affect the market. And C is wrong because entry into the market should be easy in a competitive market.
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