Output (Q)Total Fixed CostTotal Variable Cost020012052207320104201552021Table 9.1Table 9.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $5:
A. the firm suffers a loss but is better off producing at the output where MR = MC.
B. the firm suffers a loss and is better off shutting down.
C. the market price is lower than its marginal cost at the profit maximizing output level.
D. the market price is lower than the average variable cost at the profit maximizing output level.
Answer: A
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If social cost exceeds private cost, there is
A) underproduction of a good. B) a negative externality. C) a positive externality. D) too little economic profit in the activity.
In a self-regulating economy, inflationary and recessionary gaps produce shifts of the
A) AD curve that maintain the short-run equilibrium point. B) AD curve that move the economy to a long-run equilibrium point. C) SRAS curve that maintain the short-run equilibrium point. D) SRAS curve that move the economy to a long-run equilibrium point.
Two products that are usually consumed jointly would be referred to as
a. substitutes. b. complements. c. inferior goods. d. unrelated goods.
Market failures include all of the following EXCEPT
A. buyers pay for all the costs involved in the production of goods and services. B. negative externalities. C. positive externalities. D. public goods.