A firm sells 1000 units per week. It charges $70 per unit, the average variable costs are $25, and the average costs are $65 . In the short run, the firm should
a. Shut-down as the firm is making a loss of $15,000 per week
b. Shut-down as price is lower than average cost
c. Continue operating as the firm is covering all the variable costs and some of the fixed costs
d. Shut-down because it is cost effective to pay off the remaining fixed costs
c
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On a linear demand curve, the lower the price
A) the less elastic is demand. B) the more elastic is demand. C) the elasticity equals -1. D) the elasticity equals zero.
Which of the following is false?
a. Accepting a reduction in current income to acquire education and training can increase future earning ability, which can raise the standard of living. b. Improvements in literacy stimulate economic growth by reducing barriers to the flow of information and raising labor productivity. c. One problem of providing enough education in poorer countries is that since children in developing countries are an important part of the labor force at a young age, there is a higher opportunity cost of education in terms of foregone contribution to family income. d. Investment alone guarantees economic growth per capita.
The Fed responds to money demand shocks by
a. changing the velocity of money b. changing the money supply c. following the money creation rules responsible for its success in the past two decades d. increasing the required reserve ratio e. changing its definition of the natural rate of unemployment
Most economists believe that classical theory describes the world in the short run but not in the long run
a. True b. False Indicate whether the statement is true or false