Question

Chapter 12 - ________ reflects household willingness to pay, and ________ reflects the opportunity cost of the resources needed to produce a good.

Marginal utility; price

Demand; price

Price; average total cost

Price; marginal cost

Chapter 13 - The Gold Goggles Company has a monopoly over the sale of gold eyeglass frames. This company is currently pricing and producing where marginal revenue is equal to marginal cost. It is selling 50 gold eyeglass frames at a price of $5,000 each. Total costs for the company are $300,000 of which fixed costs are $100,000. You are hired as an economic consultant to this company. You should advise this monopolist to

produce in the short run but exit the industry in the long run if conditions do not change.

produce in the short run and expand capacity in the long run.

shut down in the short run but expand capacity in the long run if conditions do not change.

shut down in the short run and exit the industry in the long run.

Answer 1

Q12) option B)

demand curve shows willingness to pay, bcoz it shows the price that Consumer is willing to pay for every unit.

also price , represents the opportunity cost of the resource.

Q13) option A)

Total revenue = price * Q

= 5000*50 = 2,50,000 $

now in short run, fixed costs are ignored .

then π= 2,50,000 - 2,00,000 = $50,000

So in short run, firm should continue the production.

but in long run, taking in to account the fixed cost

π = 2,50,000 -3,00,000 = -50,000

so earning loss in long run, so shut down in long run & exit the industry.