Refer to Figure 22.3 for a perfectly competitive firm. Which of the following statements is true for this firm between the prices of $10 and $15?
A. The firm is experiencing economic losses but should continue to produce.
B. The firm is experiencing economic losses and should shut down.
C. The firm is experiencing zero economic profits.
D. The firm is experiencing economic profits because the market price is greater than or equal to the minimum AVC.
Answer: A
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Which of the following is one source of disagreement between economists?
a. Some facts about the economy are unknown. b. Economists differ in their political persuasions. c. Economic theory may not always give an unambiguous answer to a question. d. Solving one problem may make another problem worse. e. All of the above are correct.
Describe the types of entry barriers that can exist and their importance to the study of monopoly.
What will be an ideal response?
Who is most likely to be worried about high inflation?
(A) A retired couple on a fixed income (B) A shopkeeper (C) A doctor with a suburban practice (D) A factory worker
The "crowding-out effect" suggests that
A. tax increases are paid primarily out of saving and therefore are not an effective fiscal device. B. increases in government spending financed through borrowing will increase the interest rate and reduce private investment. C. it is very difficult to have excessive aggregate spending in our economy. D. consumer and investment spending always vary inversely.