When the price of a good is below its average variable cost, a perfectly competitive firm is better off ceasing production. In this case, it suffers a loss equal to its _____
a. fixed cost
b. average variable cost
c. marginal cost
d. total variable cost
a
You might also like to view...
Which of the following is not an example of inflation causing a redistribution of income because the inflation was unexpected?
A) Firms have to hire extra workers to change prices because of inflation. B) A firm signs a 4-year contract with a union based on a 3% expected rate of inflation per year, and the actual inflation rate ends up being 5% per year. C) An employee receives an increase in salary that is less than the rate of inflation because management under-predicted inflation. D) A bank collects a lower amount of interest from a loan because inflation was predicted to be 2% but was actually 4%.
International price discrimination for a good is possible if
A) goods are sold through the gray market. B) the price difference between two countries is greater than the transaction costs in arbitrage. C) the price difference between two countries is less than the transaction costs in arbitrage. D) None of the above.
Individuals in countries with __________ often spend considerable time trying to secure resources from others
a. free riders b. no criminal law c. poorly defined property rights d. side payments e. Pareto efficiency
In this case, how much of the $5.00 excise tax is paid by the consumer?
Consider the following market for CFC-11, a known ozone-depleting substance: Demand: Q= 20 – 1.5P Supply: Q= 5+0.5P whereP is price per pound. Assume the governmental authority imposes a $5 per pound excise tax on CFC-11, which shifts the supply function to Q’ = 2.5 +0.5P.Use this information for any or all of the next three questions below. a. $3.75 b. $2.25 c. $5.00 d. $1.25 e. none of the above