1. Because a monopolist faces a downward-sloping demand curve for its product, the phenomenon of diminishing marginal product does not apply to a monopolist. False. Diminishing marginal product is in relation to the output produced by hiring an additional unit of labor. This is directly related to the supply and is unrelated to demand.

2. Marginal Cost is the slope of both the Total Fixed Cost curve and the Total Variable Cost curve. False. The marginal cost is equal to the slope of the total cost equation. While the total cost is equal to the sum of the variable and fixed costs, the marginal cost is not equal to the slope of both individually.

3. For a firm in perfect competition, price equals marginal revenue in both the short run and the long run. True. In perfect competition, there are many sellers, all of whom are selling an identical product. Because of this, the market sets the price and each firm sells all output at that price. Because firms are selling all output at the market price, the price equals the marginal revenue.

4. In the short run, a firm in perfect competition should shut down if price is not at least as high as average total cost. False. A firm will stay operational as long as the price is greater than the average variable cost.

5. If the demand curve for monopolist's product fits the equation P = 45 - Q and total cost equals 5Q, the profit-maximizing level of output if the firm changes all customers the same price is 20. True A monopoly maximizes profits at the point where marginal revenue (MR) equals marginal cost. When the demand is linear, the MR is the same intercept with double the slope. So: MR = 45 - 2Q. The MC is equal to the slope of the total cost equation, which is 5. Therefore:

MR=MC45−2Q=52Q=40Q=10MR=MC45−2Q=52Q=40Q=10

6. The marginal curve cuts both the average variable cost curve and the average total cost curve at their minimum points. True. If MC is less than the AC and AVC, it will pull down the averages while it will pull up the averages if it is above them. Therefore, it will intersect the curves at their lowest points.

7. If the marginal cost is rising as output increases, average total must also be rising. False. This is only true of the MC is greater than the AC (See part 6).

8. The demand curve for a perfectly competitive firm's product is horizontal in the long run but not in the short run. False. The firm faces a horizontal demand curve in both the short and long run because the firm sells all output at the market price.