Economics Homework Thirteen Answers - Student Eleven

AllieT. 1. As output increase, AFC decreases because the fixed costs are able to spread over a larger number of units. This spread allows the fixed costs to drop and increase the profits in which the firm produces. (Answer: B)

Superb answer, with a terrific explanation.

2. Free trade encourages outsourcing. Outsourcing is the act of a company firing one employee and giving the job to someone in a foreign country, such as China, at a much lower pay rate. Free trade and outsourcing saves a firm money because the government does not impose regulations on foreign wages.

Excellent explanation again!

3. One of the main responsibilities the Federal Reserve Bank has is to protect the banking industry from collapsing.

Right.

4. The good I would produce would be inelastic. I can increase my revenue by increasing the price because the good is a necessity and there are few substitutes for that good.

Correct!

5. A perfectly competitive firm would have MR = MC in the long run. A competitive firm maximizes its profits when marginal revenue and marginal cost are equal. However, in a Monopolistic competition, there are many low barriers to entry, price exceeds marginal cost, and there are many competitors. (Answer: B)

Nope. The answer is (c). The question asked how monopolistic competition DIFFERED from perfect competition. It is particularly important in economics to read the question carefully before answering. In perfect competition, P=MC. The rest of your analysis is fine. (Minus 1).

Terrific final homework, among the best. 49/50. Congratulations on completing all the homework in this very difficult course! If you work hard in reviewing Lecture #14, the other review sections in recent lectures, and the midterm exam, then you'll ace the final exam on Jan. 7th here ... and the CLEP exam for college credit! Merry Christmas to you in the meantime.--Andy Schlafly 11:23, 20 December 2009 (EST)