A company finds that at the output level at which marginal cost equals marginal revenue, TC = $500, TVC = $400, and TR = $450. Your advice to the firm is
A) shut down, as TC > TR.
B) reduce output to reduce the cost of production.
C) increase output to reduce the per unit cost of production.
D) continue to produce because loss is less than TFC.
Answer: D
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The exit of existing firms from an industry will very likely
A. shift the industry supply curve to the left. B. cause the market price to rise. C. eliminate the losses of existing firms in the industry. D. All of the responses are correct.
The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established
A) the government must intervene to eliminate any externalities in the market. B) private transactions are efficient. C) there will be no pollution. D) Both answers B and C are correct.
Macland’s government passed a law that requires businesses to give a year’s notice to any worker they want to fire and then to pay unemployment benefits for 6 months at the fired worker’s full salary. What will be the effect on the unemployment rate?
a. It will decrease as employers hire fewer workers. b. It will decrease as more people are willing to work. c. It will increase as employers hire fewer workers. d. It will have no effect on the unemployment rate.
Suppose there are 12 million part-time workers and 104 million full-time workers in an economy. Four million of the part-time workers switch to full-time work. We can conclude that
A. the official unemployment rate will fall. B. the official unemployment rate will rise. C. the official unemployment rate will remain unchanged. D. the size of the labor force will increase.