Perfectly Competitive Output Markets

Comparative advantage refers to the ability of a party to produce a particular good at a lower opportunity cost than another party. When trading, countries will always gain by trading the good in which they have comparative advantage in producing. Since the US is trading computers for cars from Germany, the US must have comparative advantage in computer production while Germany has comparative advantage in car production.

Marginal cost is the increase in the total cost of production to produce one additional unit. In this case, we want to determine the marginal cost of producing the fourth good. The total cost for producing three goods is 26 and the total cost for producing four goods is 29. Because total cost increases by 3, 3 is the fourth good's marginal cost.

As seen in the graph below, the monopolist faces a downward sloping marginal revenue curve that is steeper than the demand curve. The monopolist produces where MC = MR which results in a higher price and lower output compared to where the marginal cost curve meets the demand curve, which is where equilibrium would be in a perfectly competitive market.

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

An oligopolistic industry is dominated by a small number of firms. Oligopolies are typically caused by significant barriers to entry, which enable a few firms to dominate the industry.

If an increase in the price of pizza causes a decrease in the demand for soda, then the two goods are complementary goods, or goods that are typically consumed together. Thus, the two goods' demand are affected by the demand of the other good. As the price of pizza increases, its demand will likely decrease. The decrease in demand for pizza causes a decrease in demand for soda because the two goods are complementary.

The profit maximizing quantity for the production of goods is the level at which marginal cost equals marginal revenue. This table allows us to easily determine the marginal cost of producing the _n_th good, but it does not give any information about the marginal revenue associated with selling th _n_th good (i.e. market price of the good).

Coal and natural gas are substitutes for each other based on the description given in the question. Therefore, an interruption in the supply of coal will lead to an increase in the demand for natural gas. This will increase both the price and quantity of natural gas.

The law of diminishing marginal utility states that the marginal value derived from a unit decreases as its use increases. This explains the phenomenon where the use of capital (its marginal product) decreases or diminishes as its utilization increases.