A firm’s minimum AC is $10, its minimum AVC $7. Show this firm’s short-run supply curve, explaining how you obtained it.

What will be an ideal response?


Draw a U-shaped AC and AVC, with Q at minimum AVC at a smaller level than for AC (Figure 10-12). MC passes through each of these minimum points. The firm’s short-run supply is MC above minimum AVC. Below minimum AVC, the firm produces zero. Only when P exceeds minimum AVC will the firm find it worthwhile to operate; below minimum AVC the firm is better off shutting down and losing its fixed cost.

Figure 10-12


Economics

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In a perfectly competitive market, firms take:

a. the money wage as exogenous, the price level as endogenous. b. the money wage and price level as exogenous, the quantity of labor as endogenous. c. the money wage and price level as endogenous. d. the quantity of labor as exogenous.

Economics

Refer to Scenario 17.5. If a fixed wage of $3000 is given the individual worker, the result will be

A) low effort 75% of the time. B) low effort 25% of the time. C) low effort. D) high effort. E) high or low effort depending on whether the worker thinks the $3000 is an acceptable wage.

Economics

Some economists argue that the Fed set its federal funds rate target "too _________" in the early 2000s, which was one of the contributing factors which led to ____________ mortgage interest rates and a(n) ___________ housing prices

A) low; low; increase B) low; low; decline C) high; high; decline D) high; high; increase

Economics

Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at

(i) Q0.
(ii) Q1.
(iii) Q2.
(iv) Q3.

Economics