The owner of Tie-Dyed T-shirts, a perfectly competitive firm, has hired you to give him some economic advice. He has told you that the market price for his shirts is $20 and that he is currently producing 200 shirts at an AVC of $15 and an ATC of $25. What would you recommend to him?
A. To shut down in the short run, as he is incurring a loss, and to leave the industry in the long run, if there are no changes in economic conditions.
B. To continue producing in the short run, as his loss from production is less than his fixed costs, but to exit the industry in the long run if there are no changes in economic conditions.
C. To continue to produce in the short run, even though he is earning a loss, and to expand in the future with the hope of increasing market share and total revenue.
D. You tell him you cannot make any recommendations until you know what his fixed costs are.
Answer: B
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Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient?
A. It is making economic profits in the long run. B. Marginal cost equals average variable cost. C. Its marginal revenue is less than average revenue. D. It produces at the minimum average total cost.
What is the amount of money a person has left of his or her income after taxes called?
(A) Disposable personal income (B) National income (C) Personal income (D) Aggregate income
If the marginal propensity to consume (MPC) is 0.80, and if policy makers wish to increase real GDP $200 billion, then by how much would they have to change taxes?
A. ?$240 million. B. ?$200 million. C. ?$180 million. D. ?$50 million.
If the United States produces the same level of output each year instead of increasing it,
a. the unemployment rate will rise. b. the unemployment rate will remain unchanged. c. the unemployment rate will fall. d. there will be full employment.