A firm sets its price at $10.00 per unit. It has an average variable cost of $8.00 and an average fixed cost of $4.00 per unit. In the long run, this firm is
a. earning zero profits and hence should shut down
b. unable to cover all of its fixed cost and hence should shut down.
c. incurring a profit.
d. incurring a loss per unit of $2.00, but since it can still cover its variable costs, should continue to operate.
b
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In the efficiency wage model, if the real wage is higher than the market-clearing wage so that there is an excess supply of labor
A) firms will hire new workers at lower wages. B) firms will replace high-paid workers with low-paid, formerly unemployed workers. C) employers will not hire workers who are willing to work for a lower wage. D) firms will demand a higher level of effort from existing employees.
Which of the following total cost functions suggests the presence of a natural monopoly?
A) TC = 2Q B) TC = 100 + 2Q C) TC = 100 + 2Q2 D) All of the above.
Economic profit is accounting profit minus the cost of capital
Indicate whether the statement is true or false
The key explanation for the prevalence of waterway pollution is: a. the inclusion in decisions of all production costs associated with the use of waterways
b. that there are private costs but no costs to society associated with the use of waterways that are not costs to society. c. that waterways are not private property and can be used free of charge. d. that waterways are not of great value to society.