Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2).
At S1, the firm is
a. preparing to shut down.
b. incurring losses.
c. earning zero economic profits.
d. earning economic profit greater than zero.
Answer is d. earning economic profit greater than zero. (Price is greater than the AC and AVC. It means that firm is able to cover all its costs and sell the product at higher price.)
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Suppose the current equilibrium wage rate for lifeguards in Houston is $7.85 an hour. A minimum wage law that creates a price floor of $8.50 an hour leads to
A) a surplus of lifeguards in Houston. B) a shortage of lifeguards in Houston. C) no changes in the lifeguard market. D) a change in the quantity of lifeguards supplied but no change in the quantity of lifeguards demanded. E) an increase in the number of lifeguards employed.
Which of the following would be expected if the tariff on foreign-produced automobiles were increased?
What will be an ideal response?
As the housing market took off in the early 2000s:
A. the growth in household debt accelerated. B. the growth in household debt slowed. C. household debt became positive for the first time since the Great Depression. D. household debt became negative for the first time since the Great Depression.
The assumption that the velocity of money and the quantity being produced is constant is held by the:
A. Keynesian school. B. supply-side school. C. classical school. D. rational expectations school.