A shoe manufacturer is producing at a point where its marginal costs are $5 and its fixed costs are $5000 . At the current price of $10 it is producing 500 pairs. If the demand goes down, such that they can now only charge $8 per pair, should they continue production in the short run?
a. No because price has fallen
b. Yes because price is still higher than marginal costs
c. No because price is lower than average cost
d. Yes because price is higher than marginal costs
b
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The balance of trade includes trade in
A) goods only. B) both goods and services. C) services only. D) neither goods nor services.
Monopolistic competition is a market structure in which there
a. are no good substitutes produced within the industry, giving each firm substantial market share b. are perfect substitutes produced within the industries, giving each firm only partial market share c. are monopolies competing to create monopolistic competition in the short run and oligopoly in the long run d. are a large number of substitute goods produced in the industry e. are only a few firms in the industry
For voluntary action to correct an externality
A. transaction costs are irrelevant. B. transaction costs have to be low. C. transaction costs have to be high. D. transaction costs have to be split evenly between all of the parties involved.
A loan contract that requires the borrower to keep a certain percentage of its assets in cash is an example of ________
A) screening B) monitoring C) a restrictive covenant D) a patent contract