Comment on the following statement: "If a firm shuts down in the short run, it will earn zero economic profit."
What will be an ideal response?
The statement is false. In the short run, the firm has fixed costs to pay. If it shuts down, its total revenue will be equal to $0 . Therefore, the firm will suffer a loss equal to its fixed costs.
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For a good whose production creates an external cost, the efficient quantity of output is
A) where the market demand curve and the market supply curve intersect. B) where the marginal social cost curve and marginal benefit curve intersect. C) as low as possible. D) zero. E) the amount of production so that the marginal social benefit exceeds the marginal social cost by as much as possible.
If producers incorrectly set the price of their product too high a:
A. shortage will result and consumers will bid the price down to equilibrium. B. surplus will result and excess goods in inventory will signal to producers to lower their prices. C. shortage will result and consumers will bid the price up to equilibrium. D. surplus will result and excess goods in inventory will signal the producers to restrict output until sales increase.
If the cost of fertilizer rises, then the price of corn will:
a. rise. b. fall. c. remain unchanged. d. react unpredictably.
Refer to Figure 2-14. Unemployment could cause this economy to produce at point B.
Indicate whether the statement is true or false.