Question from Past Microeconomics Qualifying ExamEdit

Spring 2001 - Section I, Question one, George Mason University

State first whether the following statements are true, false, or uncertain. Then briefly explain your reasoning in four or five sentences. You may use a graph if it helps clarify your answer.

A competitive firm will never produce an output along the downward sloping portion of their marginal cost curve.



The productive optimum of the perfectly competitive firm

A firm could produce where marginal cost equals price (marginal revenue -- the horizontal line) but would taking on much higher average costs. In the perfectly competitive firm (atomistic) the union of the MC, the AR=MR, and the min (AC) point all will be equal. This is also MC=MR where MC's derivative is positive (to answer like an adult).

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