The less elastic is the demand for a firm's product, the greater ...

[jho37]

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

[tdewitt]

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]

Thank you

[tdewitt]

No problemo