If marginal cost is less than marginal revenue, a firm should
a. expand output.
b. contract output.
c. maintain steady output.
d. shut down.
a. expand output.
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According to the text, the price elasticity of demand for oranges has been estimated to be -0.62. This implies that a doubling of the price of oranges would cause the quantity demanded of oranges to:
A) increase by 6.2 percent. B) decrease by 6.2 percent. C) increase by 62 percent. D) decrease by 62 percent.
Which of the following does NOT appear in the current account part of the balance of payments?
A) a loan of $1 million from Bank of America to Brazil B) foreign aid to El Salvador C) an Air France ticket bought by an American D) income earned by General Motors from its plants abroad
If a perfectly competitive firm incurs an economic loss, it should
A) shut down immediately. B) try to raise its price. C) shut down in the long run. D) shut down if this loss exceeds fixed cost.
What is an export subsidy? Discuss some of the recent examples where such subsidies were controversial.
What will be an ideal response?