Suppose that at 500 units of output marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit and average total cost at 500 units of output is $6. On the basis of this information, we:
A. can say that the firm should close down in the short run.
B. can say that the firm can produce and realize an economic profit in the short run.
C. cannot determine whether the firm should produce or shut down in the short run.
D. can assume the firm is not using the most efficient technology.
Answer: C
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The demand curve for a monopolistic competitor slopes downward because
a. demand drops to zero after a slight price increase. b. there are close but not perfect substitutes for the product. c. customers have no loyalty to the product. d. the product is undifferentiated.
In applying the lower of cost or market rule, market may be represented by:
a) current replacement costs b) net realizable value c) net realizable value less a normal profit margin d) any of the above may be correct
In Europe, government regulations discourage consumer credit. "It's to protect the consumer from himself," says Jacques Zeegers, secretary general to the Belgian Banking Association. As far as Mr. Zeegers is concerned, the government should worry that there is a failure caused by:
A. rationality problems of individuals. B. violations of inalienable rights. C. economic efficiency. D. distributional issues.
Which of these is not a beneficial supply shock?
What will be an ideal response?