Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs
First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Should Homer's shut down in the short run? A) Yes, because he is incurring an economic loss.
B) Yes, because he cannot cover all of his fixed costs.
C) No, because is making positive economic profit.
D) No, because he can cover all of his variable costs.
D
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Ignoring any supply-side effects, if government expenditure on goods and services increase by $10 billion and taxes increase by $10 billion, then real GDP ________ and the price level ________
A) increases; rises B) increases; falls C) decreases; rises D) decreases; falls E) does not change; does not change
Refer to Figure 13-7. Which of the following is the area that represents the profit or loss experienced by the firm?
A) a loss represented by the rectangle P2uvP1 B) a loss represented by the rectangle P2uwP0 C) an accounting profit equal to P1vwP0 D) a loss represented by the rectangle P1vwP0
What is the intuition that an expansion of an individual's budget set represents a gain?
A) More options are preferred to less. B) Money is the root of all happiness. C) Information is power. D) Scarcity is avoidable with prosperity.
The monopolistically competitive seller's demand curve will become more elastic the:
A. more significant the barriers to entering the industry. B. greater the degree of product differentiation. C. larger the number of competitors. D. smaller the number of competitors.