Suppose that a firm maximizes its profits by producing a quantity of 20 units. The market price is $5. The firm's variable costs are $70 and its fixed costs are $40. What should the firm do in the short run? In the long run?
What will be an ideal response?
Alas, the firm is earning negative profits in the short run. However, the firm is better off producing and losing $10 than shutting down and losing $40. So it should produce in the short run. In the long run, the firm need not renew its fixed cost obligations, and will shut down.
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Aggregate supply
A) is the overall wealth within an economy. B) is the total of all planned production in an economy. C) is the total amount of raw materials available in an economy. D) is the total amount of money circulating in an economy.
Which of the following describes what the Fed would do to pursue an expansionary monetary policy?
A) use discount policy to raise the discount rate B) use open market operations to sell Treasury bills C) raise the reserve requirement D) use open market operations to buy Treasury bills
Refer to the above table. If the price of the product is $1.50, and the marginal factor cost of an additional unit of an input is $135, how many units of labor should be hired?
A) 11 B) 12 C) 13 D) 14
A major difference between a monopolist and a perfectly competitive firm is that
A) the monopolist is certain to earn economic profits. B) the monopolist's marginal revenue curve lies below its demand curve. C) the monopolist engages in marginal cost pricing. D) the monopolist charges the highest possible price that he can.