What is the short-run break-even price? What are economic profits at this price? Why would a firm be willing to operate permanently at this price?
What will be an ideal response?
The short-run break-even price is the price at which total revenue equals total costs, so that economic profits equal zero. The firm is willing to stay in business at zero economic profits because all opportunity costs are covered, including the opportunity costs of the entrepreneur's time and any other resources he or she brings into the firm. The zero economic profits are associated with a normal rate of return, and the entrepreneur cannot expect to do better anywhere else.
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The average fixed cost curve increases as output increases
a. True b. False Indicate whether the statement is true or false
45° line diagrams show how
a. investment varies with income. b. expenditures vary with income. c. investment spending rises when GDP rises. d. GDP is affected by government purchases.
Investment in a broad portfolio of stocks is most attractive for
a. short-term investors. b. long-term investors. c. investors seeking a steady rate of return. d. investors who will need the funds for other purposes in about 10 years.
In contrast to the post–World War II period, before 1940 the government
A. actively intervened in the economy for stabilization purposes. B. used aggregate demand management to avoid recessions. C. rarely intervened in the economy to influence inflation or unemployment rates. D. used government ownership to guarantee full employment.