Indicate whether each of the following statements is true or false, and explain why. If a statement is false or true, please provide a full explanation as to why that statement is correct or not.
a. Consumer surplus is the difference between the minimum and maximum price a consumer is wiling to pay for a good.
b. Producer surplus is the difference between the actual price a producer receives for a product and the minimum price the producer would have been willing to accept for the product.
c. For Good A, supply elasticity is +2.5 and price elasticity of demand is -1.5. If an excise tax is imposed on Good A, sellers will pay the more of this tax than buyers.
d. A perfectly competitive firm can maximize its economic profit or minimize its losses only by adjusting its output.
e. If a perfectly competitive firm is producing output less than its profit-maximizing output, marginal revenue is greater than marginal cost.
a. False, a consumer surplus is the difference between the maximum price that the consumer is wiling to pay and the actual price paid by him for a good.
b. True, a producer surplus is the amount that producers benefit by selling at a ...
Solution checks the validity of the given statements.
Check the validity of given statements with the help of concepts in Economics.
Indicate whether each of the following statements is true or false and explain why.
A. A monopolistically competitive firm that is incurring a loss should immediately cease operations.
B. A monopoly will always earn economic profit because it is able to set its prices at any level it desires.
C. In the long run, firms operating in perfect competition and monopolistic competition will tend to earn normal profits.
D. Assuming a linear demand curve, a firm that wants to maximize its revenue will charge a lower price than a firm that wants to maximize its profits.
E. When a firm is able to sets its price, its price will always be less than MR.