If a firm is maximizing profits in the short run at a level of output where Average total cost > Price > Average variable cost, then the firm is _________.
A) earning positive economic profits
B) braking even (zero economic profits)
C) realizing losses but minimizing losses by continuing to produce
D) realizing losses and will minimize losses by shutting down
Ans: C) realizing losses but minimizing losses by continuing to produce
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If a new seller enters a market to compete with an existing natural monopoly, it will:
A) decrease the costs for both the sellers. B) increase the costs of production for both the sellers. C) increase the production costs for the existing seller, and a decrease in the costs for the new entrant. D) decrease the production costs for the existing seller, and an increase in the costs for the new entrant.
Keynesians explain the procyclical behavior of average labor productivity by introducing the concept of
A) menu costs. B) sticky prices. C) labor hoarding. D) sticky wages.
The short run is a period of time during which:
a. there is an expansionary gap that cannot be corrected using the passive approach. b. actual output equals potential output c. there is a recessionary gap that cannot be corrected through discretionary policy. d. resource buyers and sellers cannot adjust fully to changes in the price level. e. resource buyers and sellers can adjust fully to changes in the price level.
Market failure will most likely arise from poor information when the product is
a. a repeat-purchase item. b. easily evaluated on inspection. c. often purchased from the same seller. d. unlikely to be purchased from the same seller in the future.