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Author Question: The less elastic is the demand for a firm's product, the greater is that firm's market power. ... (Read 126 times)

jho37

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on: Jul 1, 2018
The less elastic is the demand for a firm's product, the greater is that firm's market power.
 
  Indicate whether the statement is true or false

Question 2

Even though fixed costs do not affect the output decision, an increase in fixed costs results in a wider range of prices for which the firm operates at a loss.
 
  Indicate whether the statement is true or false


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tdewitt

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Reply #1 on: Jul 1, 2018
Answer to Question 1

True . The less elastic the demand for the firm's product, the greater is the firm's ability to set price over marginal cost.

Answer to Question 2

True . An increase in fixed costs will shift AC upward but leave AVC unchanged. The gap between AVC and AC represents prices at which the firm will operate at a loss.


jho37

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Reply #2 on: Jul 1, 2018
Thank you


tdewitt

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Reply #3 on: Jul 1, 2018
No problemo


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