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16. The slope of the total variable cost curve is marginal cost. T/F If the average...

16. The slope of the total variable cost curve is marginal cost. T/F If the average total cost is declining:

A. average cost is less than marginal cost.

B. average cost is greater than marginal cost.

C. output is above the minimum cost level.

D. the marginal cost curve lies above the average cost curve. Whenever marginal cost is above average total cost, average total cost is increasing. T/F

17. If a firm sells its output at a price of $25 and the marginal cost= $19, calculate the Lerner index. In addition, the firm’s price elasticity of demand is -9 and the price elasticity of demand for the overall market is -2. Calculate the Rothschild index. Based on the Lerner index and Rothschild index, what type of market structure does this most likely represent?

18. Five firms from an industry and have the following sales of $4.5, $9, $13, $3.7, and $13 million. Calculate the HHI.

19. Assume a monopoly has marginal costs= $10,000 and the price elasticity of demand= -2, find the profit maximizing price.

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Answer #1

16. The slope of total variable cost is the marginal cost when production takes place in a short run and there are fixed and variable cost; marginal cost is the additional cost of employing additional variable input hence it is the slope of total variable cost.

the correct option is True

From the relationship between average cost and marginal cost; when average cost is declining then marginal cost lies below it.

the correct option is (b)

Similarly when marginal cost is above average cost then the average cost rises or is increasing.

the correct option is True

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