If a firm's total revenue is less than its variable cost when the firm produces the level of output at which price equals marginal cost, then the firm should:
A. shut down.
B. not change its level of output even if it's earning an economic loss in the short run.
C. produce more so that its total revenue increases.
D. purchase more fixed factors of production.
Answer: A
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In the long run, a firm in a perfectly competitive industry will supply output only if its total revenue covers its
A) implicit costs. B) fixed costs. C) explicit costs plus its implicit costs. D) explicit costs.
Which of the following is NOT an example of a supply shock?
A) a drought in the Midwest B) a decline in natural gas prices following discovery of new fields C) the introduction of a new line of computer-controlled machine tools in manufacturing D) a substantial increase in federal government spending on Medicare
A federal government deficit is said to exist in the event that ________
A) federal outlays are less than federal revenues B) federal outlays are equal to federal revenues C) federal outlays are greater than federal revenues D) any of the above conditions exists
Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is
a. $0. b. $15. c. $305. d. $315.