A perfectly competitive firm faces a market clearing price of $150 per unit. Average variable costs are at the minimum value of $200 per unit at an output rate of 100 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be
concluded that the short-run profit-maximizing output rate is
A) 75 units, at which the firm earns zero economic profits per unit sold.
B) 75 units, at which the firm earns $50 in economic profits per unit sold.
C) 100 units, because marginal cost equals average variable costs.
D) 0 units, because price is less than average variable costs.
Answer: D
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XYZ Gadget Company is currently considering which investment projects it should undertake. The following list of projects along with the estimated rate of return of each project is presented to the executive management team:Project A (8.5%)Project B (7%)Project C (6%)Project D (11%)Project E (5.5%)The current interest rate in the loanable funds market is 5%. However, if an increase in government borrowing pushes the interest rate to 7.5%, we would expect the company to discontinue investment plans for all but ________ of its planned projects.
A. two B. three C. four D. one
A free market can be defined as a market structure where all exchanges are voluntary, and prices are free to fluctuate. Does a perfectly competitive market qualify as a free market?
What will be an ideal response?
Under what conditions does an oligopoly market result in the same outcome as monopoly? What does this imply for the oligopoly's long-run profits?
What will be an ideal response?
One of the most dramatic bank failures of the 1980s was the demise of Chicago's Continental Illinois Bank. Continental ran into problems because it
a. acquired deficient earth moving machinery from Caterpillar b. acquired a series of unsound assets from Penn Square Bank of Oklahoma City c. invested too heavily in the Brazilian economy in the 1970s d. financed deficit spending by Archer Daniels Midland e. sued the FDIC and failed