The firm's average total costs are decreasing throughout this range. Therefore, there areincreasingreturns to scale within this range.

This question refers to Alex'sopportunity costof producing apple juice. If he specialized completely in apple juice he could make twice as much as if he specialized completely in orange juice. Therefore, each gallon of apple juice costs him 1/2 gallon of foregone production in orange juice.

If they both produce only one type of juice, Alex can produce more for both apple juice and orange juice. Therefore he has an absolute advantage in for both and neither of the answers dealing with absolute advantage fit.

Let's look at Alex and Carl'srelativecost of producing each juice:

Opportunity cost to Alex of producing:

Apple juice - 1/2 gallon orange juice

Orange Juice - 2 gallons apple juice

Opportunity cost to Carl of producing:

Apple juice - 4/3 gallon of orange juice

Orange juice - 3/4 gallon of apple juice

While Alex is more efficient at producing both types of juice from an absolute perspective, it costs him 2 gallons of apple juice to produce 1 gallon of orange juice, compared to Carl, who forgoes only 3/4 gallon of apple juice to produce a gallon of orange juice. Carl has the comparative advantage in producing orange juice. (Alex has the comparative advantage in apple juice, 1/2 gallon vs. 4/3 gallons.)

Electric guitars are a likely substitute for acoustic guitars. If the price of electric guitars goes down, more consumers are likely to buy them instead of acoustic and fewer acoustic guitars will be demanded at any price.

This is an inward shift of the demand curve, which results in a lower equilibrium price and quantity when you graph it.

The cost structure of the remaining acoustic guitar producers would not change, but with fewer sellers, there would be fewer guitars available at any given price.

This is an inward shift of the supply curve, if you graph this, you can see it results in a higher equilibrium price and lower quantity.

Especially during rush hour, the market for space on a freeway is comparable to many other competitive markets for goods and services., with a downward sloping demand curve. While more space can be built in the long-run, in the short-run we have a vertical supply curve that indicates fixed supply.

If you draw this out, you can see that the market clearing price is above zero. By not charging a toll, the authority on this road has effectively set a price of zero, or a price ceiling. The quantity of space demanded on the peak hour roadway is thus limited only by the number of drivers in the area (who are able and willing to pay other costs of driving, including time wasted in traffic). The difference in the quantities demanded and supplied is the shortage.

The provision of an off-street parking space for every unit would be an added cost (a significant cost in a dense urban area) for landlords. This is effectively an inward shift in supply.

The result would be generally higher rents and a lower occupancy rate.

The fixed costs can be determined by looking at the costs for the firm when no units are being produced. These costs always remain with or without production. This is true only in the short run, as in the long run there are no fixed costs.

The profit maximizing point is where marginal revenue equals marginal cost (MR=MC). At 3 units of production, the marginal revenue is 7 (27-20 = 7) and the marginal cost is 7 (30-23 = 7). Therefore, 3 units is the profit maximizing level.

Note that the profit maximizing point does not have to be a point where the firm makes a positive profit. Since the firm in this example never has TR exceed TC, it will not generate a positive profit. However, the profit maximizing point can also be the point where the firm makes the least negative profit. A firm will produce goods in the short run as long as the marginal revenue exceeds the average variable cost, which it does in this scenario.This means that the firm will produce goods until it's obligations are up and it can leave the market in the long run.

In a perfectly competitive market, the firm would price the good equal to marginal cost (P=MC). Since the marginal cost at the profit maximizing point is 7, price would equal 7.

In this example, we again note that this question operates in the short run. Despite losing money, firms cannot leave the market in the short run due to fixed cost obligations (rent, contracts, etc.) Not producing any goods is not the same as leaving the market (which the firm would do in the long run). Not producing any good would result in a net profit of -15 whereas producing 3 units of goods at a price of 7 would result in a net profit of -3. Therefore, production would be the best option for this firm.