The annual insurance premiums for Michael’s Machine Shop have permanently risen because of a recent series of thefts by employees, but there is no change in the premiums paid by Michael's competitors. If machine shops are a competitive constant-cost industry, then in the long run
a. Michael's profit will fall to zero.
b. Michael's Machine Shop will be driven out of business.
c. the higher fixed costs will have no effect on Michael's pricing and production decisions.
d. the demand for service from Michael’s Machine Shop will fall.
b. Michael's Machine Shop will be driven out of business.
You might also like to view...
One year before maturity the price of a bond with a principal amount of $1,000 and a coupon rate of 5% paid annually fell to $981. The one year interest rate must be
A. 8.5%. B. 7.0%. C. 5.0%. D. 1.9%.
A single-price monopolist maximizes profits by producing the output at which
A) price equals marginal cost. B) price equals marginal revenue. C) marginal revenue equals marginal cost. D) marginal cost equals average cost.
An unintended effect of a new tax placed on the producers of good A may include
A. a higher price paid by the consumers of good A. B. less consumers' surplus for the buyers of good A. C. fewer workers employed in the production of good A. D. all of the above
Considering the concept of cross-price elasticity, if two goods are substitutes:
A. an increase in the price of one causes an increase in the demand for the other. B. an increase in the price of one causes a decrease in the demand for the other. C. the cross-price elasticity is negative. D. a decrease in the price of one causes an increase in the demand of the other.