At the point at which P=MC, suppose that a perfectly competitive firm's MC = $100, its AVC = $80 and its AC = $110. This firm should
A) shut down immediately.
B) continue operating in the short run.
C) try to take advantage of economies of scale.
D) try to increase its advertising and promotion.
B
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Suppose the development of the European Union leads to greater investment in Europe. You'd expect
A) a recession in Europe. B) a decline in the world real interest rate. C) a rise in the current account in Europe. D) an increase in the world real interest rate.
An actuarially fair return means
A. returns on investments are indexed to the stock market. B. returns on investments have to be positive. C. benefits received, on average, would be equal to the premiums paid. D. premiums for insurance are generally paid by the government.
If the quantity demanded increases by 20 percent in response to a 10 percent decrease in price, demand is classified as
a. unstable. b. relatively inelastic. c. relatively elastic. d. of unitary elasticity.
A competitive firm
a. and a monopolist are price takers. b. and a monopolist are price makers. c. is a price taker, whereas a monopolist is a price maker. d. is a price maker, whereas a monopolist is a price taker.