Exhibit 8-8 A firm's cost and marginal revenue curves
In Exhibit 8-8, product price in this market is fixed at $35. This firm is currently operating where MR = MC. What do you advise this firm to do?
A. This firm should shut down.
B. This firm could increase profits by increasing output.
C. This firm could increase profits by decreasing output.
D. This firm should continue to operate at its current output.
Answer: D
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Which of the following is NOT an example of an externality?
A) A bread company emits a wonderful aroma in the air that makes people smile. B) The neighbor's wind chimes interfere with your sleep. C) A firm fires 500 people. D) Cancer-causing chemicals are dumped into the drinking water supply of a city.
Auto dealers slash prices at the end of the model year in response to deficient demand/excess inventory but restaurants facing the same problem slash production because
a. auto customers are less price sensitive than restaurant customers b. price elasticity of demand (in absolute values) is higher for auto than restaurant customers c. price elasticity of supply is lower in auto than in restaurants d. restaurant food spoils quickly and is much more perishable e. price elasticity of supply in autos is smaller than the absolute value of price elasticity of demand but the reverse is true for restaurants
If inflation expectations decline, then the short-run Phillips curve shifts
a. left, so that at any inflation rate unemployment is lower in the short run than before. b. right, so that at any inflation rate unemployment is lower in the short run than before. c. right, so that at any inflation rate unemployment is higher in the short run than before. d. left, so that at any inflation rate unemployment is higher in the short run than before.
Under oligopoly, a kinked-demand curve would explain why firms:
A. undertake new investment. B. are approximately the same size. C. avoid price wars. D. have different levels of efficiency.