hey thanks for previous replys to earlier questions...espicially "economyst", you have been a great help !!!
stuck on these questions, so if anyone can help plz do !!
Q:state whether the folloing statements are true or false and EXPLAIN clearly the reasons for your view ( P.s if you cant bethored to explain fully, please advice me on what i should discuss further inorder to make the answer a little longer)
a) "as long as the firm has to pay for an input, it would be wasteful not to use input services purchased"
b) " a profit-maximising competitve firm will never produce in the region where average variable cost is declining"
c) " the reason why firms often charge a lower price at higher output levels is because they are able to spend their fixed costs over a larger production run"
d) "a monopolist is best off operating on the inelastic portion of the demand curve, where it can increase its price without losing many customers"
e) "a monopolist attempts to maximise the differnce between price and average cost"
THANX in advance !!
p.s if "economyst" is here, can u plz tell me your email address, you have been a real life saver !!
Thanks for your confidence in me.
a) a toughie, but I would go False. At least some inputs have secondary markets. That is, the best use for an input is to re-sell it to someone else.
b) A natural monopoly has declining AVCs. However, I believe the answer is True for competative firms, They will opperate when a rising MC=Price
c) False, output and therefore price are determined where MC=MR, regardless of fixed costs.
d) False, a monopolist operates in the elastic portion.
e) False, same as c.
Sorry, I will not give you my email. I am a volunteer. And as my old econ advisor used to say, "Volunteers Do It For Free" I will probably continue to provide free help as my own time permits. But I might not.
he didn't want your email to pay you, he wanted it so he could scab more answers off you as he needed.
Champion
Its good there is someone like you to help.You don't have to give answers, but discussing ways to solve problems is good.
Stinky -
Thank you for your feedback and support. I'm here to help and discuss ways to solve problems, so feel free to ask any further questions you may have. Let's move on to the explanations for the given statements:
a) "As long as the firm has to pay for an input, it would be wasteful not to use input services purchased."
This statement is false. While it may seem logical that using purchased input services is always beneficial, there are cases where it is more cost-effective not to use them. For example, if the firm can produce the input internally at a lower cost or if the input is not essential for production, it may be wasteful to use the purchased input services.
b) "A profit-maximizing competitive firm will never produce in the region where average variable cost is declining."
This statement is true. A competitive firm maximizes its profit by producing where marginal cost (MC) equals price (P). As long as average variable cost (AVC) is declining, the marginal cost will be lower than the average variable cost. Therefore, it is more profitable for the firm to produce at a higher level, where MC intersects with P.
c) "The reason why firms often charge a lower price at higher output levels is because they are able to spread their fixed costs over a larger production run."
This statement is false. The price charged by firms is determined by market conditions and the intersection of marginal cost and marginal revenue (MC=MR), regardless of fixed costs. While firms may benefit from economies of scale at higher output levels, the price charged is not directly influenced by fixed costs.
d) "A monopolist is best off operating on the inelastic portion of the demand curve, where it can increase its price without losing many customers."
This statement is false. A monopolist maximizes its profit by setting the price and quantity where marginal revenue (MR) equals marginal cost (MC). Typically, this occurs at the elastic portion of the demand curve, where the monopolist can capture more customers by lowering the price.
e) "A monopolist attempts to maximize the difference between price and average cost."
This statement is false. A monopolist maximizes its profit by setting the price and quantity where marginal cost (MC) equals marginal revenue (MR), not by maximizing the difference between price and average cost.
I hope these explanations clarify the reasoning behind each answer. If you have any more questions, feel free to ask!