The situation in which average costs are decreasing as output increases is known as A. diseconomies of scale. constant returns to scale. economies…

 A. diseconomies of scale.

B. constant returns to scale.

C. economies of scale.

D. marginal returns to scale.

2).  A. marginal revenue equals average variable cost.

B. average total cost equals marginal revenue.

C. average total cost equals marginal cost.

D. marginal revenue equals marginal cost.

3).  A. the profit-maximizing quantity times the market price.

B. positive.

C. $0.

D. negative.


A. Perfectly competitive firms earning zero economic profit should shut down because they are not making any money.

B. Due to information asymmetries, different firms may charge different prices for their goods, even if they are in a perfectly competitive market.

C. Perfectly competitive firms may earn positive economic profit in the short run, but will always earn zero economic profit in the long run

D. It is impossible for perfectly competitive firms to earn positive economic profits both in the short run and in the long run.


A. 80 units of labor and 0 units of capital.

B. 20 units of labor and 40 units of capital.

C. 10 units of labor and 70 units of capital.

D. 50 units of labor and 10 units of capital.

8).  A. $8,000,000

B. $2,000,000

C. $1.67

D. $40


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