Think about a publishing firm that uses labor, ink, paper, and electricity as its variable inputs, and rents building space and printing presses as its fixed inputs. Describe how this publisher's short-run response to an increase in its labor costs would differ from its short-run response to an increase in one of its fixed costs
Although both types of cost increases will drive the firm's profits down, it will only respond to the increase
in the variable cost in the short run. The higher labor cost will shift the firm's ATC, AVC, and MC curves
upward, and will induce the firm to reduce production in the short run. The higher fixed cost will not move
the MC curve, and therefore will not lead to a change in output in the short run.
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Moving ________ along the marginal cost curve, the ________
A) upward; opportunity cost of one more unit increases B) upward; marginal cost decreases C) downward; marginal cost increases D) upward; opportunity cost of one more unit does not change E) downward; opportunity cost of one more unit does not change
An expenditure maximizing multi-product firm will set the same relative prices as a welfare maximizing firm
Indicate whether the statement is true or false
Which of the following is a main characteristic of exchanges in the market system?
A) Decisions to trade are based on individuals' self interest. B) Exchanges are highly regulated by the government. C) Sellers hire economists to determine the market clearing price. D) Exchanges are part of the legislative imperative.
Which of the following explains why business owners have a strong incentive to strive for operational efficiency?
a. they recognize that operational efficiency promotes the public interest. b. since the owners are residual income claimants, increased efficiency will mean a higher income for the owners. c. if production is not conducted efficiently, the firm will ship jobs and capital out of the domestic market in order to be able to compete effectively. d. Increased operational efficiency allows the firm to receive government tax breaks.