What is the difference between "shutting down temporarily" and "exiting the industry"?
What will be an ideal response?
The difference between the two has to do with fixed costs. In the short run a firm cannot avoid its fixed costs. When price falls so low that the firm can no longer cover its variable costs of production with the revenue it earns from selling its product it should shut down temporarily and wait for economic conditions to improve. In the long run, all costs are variable. If total revenue cannot cover all costs the firm will exit the industry.
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Scatterbrain Samantha often forgets to lock her house. This has caused the probability of a burglary to be 30%. If her house gets broken into, she faces a property loss of $10,000, otherwise she gets to keep her $100,000 . If Samantha is offered full coverage for her house at $1,500, what is her expected wealth with the insurance policy?
a. $80,000 b. $87,000 c. $97,000 d. $98,500
In a perfectly competitive market price takers exist because there are:
A. few sellers and many buyers. B. few buyers and many sellers. C. many buyers and sellers. D. few sellers and buyers.
Which of the following is an example of an activity that generates positive externalities
a. driving a car b. producing clothing c. washing your car d. education e. building a bridge
By 1937, when a new recession began in the midst of the Great Depression,
A. GDP had almost recovered to its 1929 level, but unemployment was still above the 1929 level. B. both GDP and unemployment had returned to near their 1929 levels. C. unemployment had almost fallen back to its 1929 level, but GDP had yet to recover to its 1929 level. D. neither GDP nor unemployment had returned to near their 1929 levels.