When price does not cover average total cost at any rate of output, the firm should shut down in the short run.
Answer the following statement true (T) or false (F)
False
A firm should shut down if it does not cover its average variable cost. When price is less than ATC but greater than AVC, a firm will lose less if it operates because it is covering some of its fixed costs.
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"Lower ticket prices would lead to more people attending ballgames." This statement is a
A) macroeconomic statement. B) statement assessing the social interest versus the private interest. C) normative statement. D) statement that confuses marginal cost and sunk cost. E) positive statement.
According to your authors, the prohibition on alcohol in the U.S. primarily shifted the ________ curve to the ________
A) supply; right B) supply; left C) demand; left D) demand; right
Suppose the demand for Pepsi-Cola is qp = 50 - 2pp + 1pc. The firm faces a constant marginal cost of m, and pc denotes the price of Coca-Cola. Assuming Bertrand behavior, derive Pepsi-Cola's best-response function and explain how the firm changes price in response to changes in its own marginal cost and changes in Coca-Cola's price
What will be an ideal response?
Recently the governor of Vermont proposed that cigarette taxes in Vermont should be increased substantially, from 44 cents a pack to 66 cents a pack. He estimates that Vermont can raise $20 million in revenue from this tax hike
He also pointed out that the neighboring state of New Hampshire was considering an increase in cigarette taxes. a. How can it be that an increase in cigarette taxes will increase tax revenue, because, after all, a higher tax will increase cigarette prices and thereby decrease the quantity demanded? b. If New Hampshire chooses not to increase cigarette taxes, is it likely that Vermont can still raise $20 million in tax revenue? Why or why not? Explain