A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?
A) No, it should shut down because it is making a loss.
B) Yes, it should continue to produce because its price exceeds its average fixed cost.
C) Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000.
D) There is insufficient information to answer the question.
Answer: C
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If the marginal propensity to save is 0.1, then a $10 million decrease in disposable income will
A) increase consumption by $9 million. B) decrease consumption by $1 million. C) increase consumption by $1 million. D) decrease consumption by $9 million.
A consumer's budget line will shift to the right in a parallel manner if:
a. the price of the good on the X-axis decreases. b. the price of the good on the Y-axis increases. c. the consumer's income increases d. the consumer's income decreases.
Moral hazard is associated with
A) imperfect information. B) perfect information. C) the low costs of monitoring behavior. D) all of these choices.
A metal refining plant emits sulfur dioxide into the air and has decided to install air scrubbers to reduce the amount of pollution. Each scrubber costs $180,000 and the Environmental Protection Agency (EPA) fines the plant $5,000 for every part of pollution emitted per million. 
Based on the information above, the first air scrubber ________ (increases/decreases) the total cost of pollution by $________.
A. decreases, $250,000 B. increases, $530,000 C. decreases, $ 70,000 D. increases, $180,000 E. none of the above