Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point
What will be an ideal response?
The shutdown point is the point at which the price equals minimum average variable cost. If the price falls further, the firm does not even cover its variable costs if it operates. Its loss if it operated thus exceeds the loss of shutting down and so the firm shuts down.
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What happens to the marginal revenue product curve of a factor as more of a complementary factor is hired?
A) It shifts to the left, because its marginal product decreases. B) It shifts to the left, because its marginal product increases. C) It shifts to the right, because its marginal product decreases. D) It shifts to the right, because its marginal product increases.
Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that its "...factories have been exposed to ... competition from China, India, and other Asian mass producers." As a result, "the main export industry has seen a 30% reduction in volume..." The story describes:
a) a decrease in autonomous expenditure b) a decrease in induced expenditure c) an unplanned decrease in inventories d) an increase in equilibrium expenditure
In 2017, Peelville consumed 30,000 bananas. In 2018, banana consumption rose to 35,000. Calculate the percentage change in banana consumption
A) 11.66% B) 14.28% C) 16.67% D) 22.25%
Which of the following does NOT influence the type of oligopoly that forms?
A) Whether firms act sequentially or simultaneously. B) Whether firms set price or quantity. C) The type of demand curve the firms face. D) The time horizon over which firms will be in competition.