Shazam, a maker of magic wands, is selling in a purely competitive market. Its output is 500 wands, which sell for $10 each. At this level of output, the marginal cost is $10 and the average variable cost is $12. Should the firm increase output,
decrease output, or not produce? Why?
What will be an ideal response?
The firm should shut down and not produce any output because at the current level of output, marginal revenue or price is not even covering the average variable cost. The firm would minimize its losses by shutting down and not producing any output.
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Labor productivity increases with
A) increases in consumption expenditure. B) increases in depreciation. C) increases in capital. D) All of the above answers are correct.
Suppose that you have noticed that almost all of the car dealers in your city are located along a three-block stretch of the same street. A likely reason for this clustering of car dealers is that:
A. each dealer is attempting to locate closest to the customers. B. each dealer sells a different brand of car, so they are not competitors and do not have to be concerned about the other dealers' locations. C. there is a social norm in that city that dealers follow in choosing location. D. the dealers are better able to form a cartel.
Which of the following statements is true?
A) An explicit cost is an actual cost; an implicit cost is a theoretical cost. B) Economic costs include both explicit costs and implicit costs. C) An explicit cost is more important, dollar for dollar, than an implicit cost. D) Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs.
Assume that the MPC is 0.9. If government purchases increase by $100, equilibrium output ________; and if taxes increase by $100, equilibrium output ________.
A. increases by $1,000; decreases by $900 B. increases by $1,000; decreases by $1,000 C. increases by $400; decreases by $400 D. increases by $900; decreases by $1,000