A firm suffering short-run losses will continue to operate rather than shut down when price is less than its average variable costs.
Answer the following statement true (T) or false (F)
False
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The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
A 10% increase in the price of pizza causes a 10% drop in the quantity of both pizza and beer sold. Describe elasticities and the nature of the two products.
a. The price elasticity of demand for pizza is equal to 1 and the cross price elasticity of beer with respect to the price of pizza is also 1. In this example, beer and pizza complements. b. The price elasticity of demand for pizza is equal to 1 and the cross price elasticity of beer with respect to the price of pizza is (-)1. In this example, beer and pizza complements. c. The price elasticity of demand for pizza is equal to (-)1 and the cross price elasticity of beer with respect to the price of pizza is 1. In this example, beer and pizza complements. d. The price elasticity of demand for pizza is equal to (-)1 and the cross price elasticity of beer with respect to the price of pizza is also (-)1. In this example, beer and pizza complements.
Which of the following is NOT a characteristic of monopolistic competition?
A) large number of sellers B) sales promotion and advertising C) homogeneous product D) easy entry of new firms in the long run
Refer to the information provided in Figure 3.7 below to answer the following question(s).
?Figure 3.7Refer to Figure 3.7. Assume the market is initially at Point B and that pizza is a normal good. A decrease in income would cause the market to move from Point B on demand curve D2 to
A. demand curve D1. B. demand curve D3. C. Point A on demand curve D2. D. Point C on demand curve D2.