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Cross Topic Glue Questions

10 important questions on Cross Topic Glue Questions

1) Give the universal profit-max rule in your preferred derivative style.

d π(q)/dq = d r(q)/dq − d c(q)/dq = 0 → set MR = MC, then check it’s a maximum.

2) How does falling marginal product show up in cost curves?

Falling MPL means the next unit of output requires more input, so MC rises; AVC eventually rises too.

3) Shutdown vs exit—what’s the difference?

Shutdown is a short-run decision to produce zero but stay in the market (you still pay FC). Exit is a long-run decision to leave the market entirely (no more FC).

4) Why do competitive firms earn zero economic profit in the long run?

Entry and exit move price to min AC; profits attract entrants; losses push firms out.

5) What’s the cleanest way to derive a firm’s short-run supply?

Take MC above min AVC and invert: if price is below min AVC, quantity supplied is zero; otherwise solve p = MC for q.

6) What condition characterizes cost minimization for a given output?

Set the technical trade-off equal to the price trade-off: MRTS = w/r (same “bang per buck”).

7) If the wage (w) rises, what happens to the isocost line and the chosen input mix?

Isocost gets steeper (labour relatively costlier); the firm substitutes toward capital if possible.

8) What’s the quickest verbal proof that monopoly creates deadweight loss?

Price exceeds marginal cost, so there are buyers willing to pay more than it costs to produce the extra units—but those trades don’t happen.

9) Why does MR cross zero where total revenue is maximized?

Because MR is the slope of TR: when TR peaks, its slope is zero; beyond that, selling more reduces TR.

10) In which models is price equal to marginal cost?

Perfect competition (by definition) and Bertrand with identical products and no capacity limits.

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ECONS202 Q&A

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Cross Topic Glue Questions

10 important questions on Cross Topic Glue Questions

1) Give the universal profit-max rule in your preferred derivative style.

2) How does falling marginal product show up in cost curves?

3) Shutdown vs exit—what’s the difference?

4) Why do competitive firms earn zero economic profit in the long run?

5) What’s the cleanest way to derive a firm’s short-run supply?

6) What condition characterizes cost minimization for a given output?

7) If the wage (w) rises, what happens to the isocost line and the chosen input mix?

8) What’s the quickest verbal proof that monopoly creates deadweight loss?

9) Why does MR cross zero where total revenue is maximized?

10) In which models is price equal to marginal cost?

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