Output - AP Microeconomics

The profit-maximizing rule for firms is to continue producing until marginal revenue equals marginal cost.

Answer choice "Marginal Revenue is greater than marginal cost" is incorrect, because firms should continue producing under this condition.

All of the other answer choices involving either total revenue or total cost are incorrect because profit-maximization occurs "at the margin", i.e. the profit-maximization rule applies to marginal, not total, cost curves.

We can think of marginal revenue as our grade in a class we are currently taking and average total cost as our total GPA. If we get a better grade in our current class than our GPA, then our GPA must increase. Similarly, if marginal cost is greater than average total cost, then average total cost must be increasing. Answer choice "average total cost must be increasing" is correct.

To eliminate the other answer choices, remember that when marginal cost is greater than average total cost, 1) marginal revenue can still be decreasing, 2) marginal revenue is not necessarily equal to marginal cost, and 3) total revenue can still be changing.

Remember that the price elasticity of supply is calculated by taking the percent change of the quantity supplied (in this case 0%) divided by the percent change in the price (in this case 5%). So the price elasticity of supply of Good Y is 0.

Because a monopolist is the only producer in its industry, a monopolist's marginal cost curve is equivalent to the industry supply curve.

Average fixed cost and marginal revenue are incorrect because they are downward sloping, whereas supply is upward sloping.

Average total cost is a distortion of the correct answer.

Diseconomies of scale (and economies of scale) refer to the relationship between a firm's output and its long-run average cost. If a firm is operating under a diseconomy of scale, then doubling its output results in more than doubling its long-run average total cost.

Answer choice "its long-run average cost will exactly double" refers to the situation in which the firm is operating at its minimum efficient scale, the lowest point on the long-run average cost curve.

Answer choice "its long-run average cost will less than double" refer to situations in which the firm has an economy of scale.

Answer choices "its short-run average cost will more than double" and "its short-run average cost will exactly double" are incorrect because diseconomies of scale refer to long-run, not short-run, cost curves.

The profit-maximizing rule for firms is to continue producing until marginal revenue equals marginal cost.

Answer choice "Marginal Revenue is greater than marginal cost" is incorrect, because firms should continue producing under this condition.

All of the other answer choices involving either total revenue or total cost are incorrect because profit-maximization occurs "at the margin", i.e. the profit-maximization rule applies to marginal, not total, cost curves.

We can think of marginal revenue as our grade in a class we are currently taking and average total cost as our total GPA. If we get a better grade in our current class than our GPA, then our GPA must increase. Similarly, if marginal cost is greater than average total cost, then average total cost must be increasing. Answer choice "average total cost must be increasing" is correct.

To eliminate the other answer choices, remember that when marginal cost is greater than average total cost, 1) marginal revenue can still be decreasing, 2) marginal revenue is not necessarily equal to marginal cost, and 3) total revenue can still be changing.

Remember that the price elasticity of supply is calculated by taking the percent change of the quantity supplied (in this case 0%) divided by the percent change in the price (in this case 5%). So the price elasticity of supply of Good Y is 0.

Because a monopolist is the only producer in its industry, a monopolist's marginal cost curve is equivalent to the industry supply curve.

Average fixed cost and marginal revenue are incorrect because they are downward sloping, whereas supply is upward sloping.

Average total cost is a distortion of the correct answer.

Diseconomies of scale (and economies of scale) refer to the relationship between a firm's output and its long-run average cost. If a firm is operating under a diseconomy of scale, then doubling its output results in more than doubling its long-run average total cost.

Answer choice "its long-run average cost will exactly double" refers to the situation in which the firm is operating at its minimum efficient scale, the lowest point on the long-run average cost curve.

Answer choice "its long-run average cost will less than double" refer to situations in which the firm has an economy of scale.

Answer choices "its short-run average cost will more than double" and "its short-run average cost will exactly double" are incorrect because diseconomies of scale refer to long-run, not short-run, cost curves.

The profit-maximizing rule for firms is to continue producing until marginal revenue equals marginal cost.

Answer choice "Marginal Revenue is greater than marginal cost" is incorrect, because firms should continue producing under this condition.

All of the other answer choices involving either total revenue or total cost are incorrect because profit-maximization occurs "at the margin", i.e. the profit-maximization rule applies to marginal, not total, cost curves.

We can think of marginal revenue as our grade in a class we are currently taking and average total cost as our total GPA. If we get a better grade in our current class than our GPA, then our GPA must increase. Similarly, if marginal cost is greater than average total cost, then average total cost must be increasing. Answer choice "average total cost must be increasing" is correct.

To eliminate the other answer choices, remember that when marginal cost is greater than average total cost, 1) marginal revenue can still be decreasing, 2) marginal revenue is not necessarily equal to marginal cost, and 3) total revenue can still be changing.

Remember that the price elasticity of supply is calculated by taking the percent change of the quantity supplied (in this case 0%) divided by the percent change in the price (in this case 5%). So the price elasticity of supply of Good Y is 0.

Because a monopolist is the only producer in its industry, a monopolist's marginal cost curve is equivalent to the industry supply curve.

Average fixed cost and marginal revenue are incorrect because they are downward sloping, whereas supply is upward sloping.

Average total cost is a distortion of the correct answer.

Diseconomies of scale (and economies of scale) refer to the relationship between a firm's output and its long-run average cost. If a firm is operating under a diseconomy of scale, then doubling its output results in more than doubling its long-run average total cost.

Answer choice "its long-run average cost will exactly double" refers to the situation in which the firm is operating at its minimum efficient scale, the lowest point on the long-run average cost curve.

Answer choice "its long-run average cost will less than double" refer to situations in which the firm has an economy of scale.

Answer choices "its short-run average cost will more than double" and "its short-run average cost will exactly double" are incorrect because diseconomies of scale refer to long-run, not short-run, cost curves.

The profit-maximizing rule for firms is to continue producing until marginal revenue equals marginal cost.

Answer choice "Marginal Revenue is greater than marginal cost" is incorrect, because firms should continue producing under this condition.

All of the other answer choices involving either total revenue or total cost are incorrect because profit-maximization occurs "at the margin", i.e. the profit-maximization rule applies to marginal, not total, cost curves.

We can think of marginal revenue as our grade in a class we are currently taking and average total cost as our total GPA. If we get a better grade in our current class than our GPA, then our GPA must increase. Similarly, if marginal cost is greater than average total cost, then average total cost must be increasing. Answer choice "average total cost must be increasing" is correct.

To eliminate the other answer choices, remember that when marginal cost is greater than average total cost, 1) marginal revenue can still be decreasing, 2) marginal revenue is not necessarily equal to marginal cost, and 3) total revenue can still be changing.

Remember that the price elasticity of supply is calculated by taking the percent change of the quantity supplied (in this case 0%) divided by the percent change in the price (in this case 5%). So the price elasticity of supply of Good Y is 0.

Because a monopolist is the only producer in its industry, a monopolist's marginal cost curve is equivalent to the industry supply curve.

Average fixed cost and marginal revenue are incorrect because they are downward sloping, whereas supply is upward sloping.

Average total cost is a distortion of the correct answer.