A perfectly competitive firm is currently producing an output level where price is $10.00, average variable cost is $6.00, average total cost is $10.00, and marginal cost is $8.00. In order to maximize profits, this firm should
A) increase the market price.
B) shut down.
C) decrease its output.
D) increase its output.
E) not change its output — this firm is at its profit-maximizing position.
Ans: C) decrease its output.
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If the government institutes a specific tax for a good
A) the producer simply passes the entire tax on to the consumer. B) the producer must absorb the entire tax. C) the producer can generally only pass part of the tax onto the consumer. D) the equilibrium price drops.
Refer to Figure 31.3 for a competitive labor market. A shift in labor supply from S1 to S2 could be caused by:
A. An increase in the price of machinery used in the production of the product. B. An increase in the price of the product being produced. C. An increase in the wage rate. D. The unionization of another, separate labor market.
If over the next few years inflation is higher in Mexico than in the U.S., then according to purchasing-power parity which of the following should rise?
a. the U.S. real exchange rate but not the U.S. nominal exchange rate b. the U.S. nominal exchange rate but not the U.S. real exchange rate c. the U.S. real exchange rate but not the U.S. nominal exchange rate d. neither the U.S. real nor the U.S. nominal exchange rate
Table 14.1Table 14.1 represents 3 markets for used computers. Which of the markets in Table 14.1 are in equilibrium?
A. 1 only B. 2 only C. 3 only D. 2 and 3