Refer to Scenario 9.5 below to answer the question(s) that follow. SCENARIO 9.5: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 percent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $3 on average per meal. Refer to Scenario 9.5. In the short run, if the restaurant shuts down, it ________ variable costs and ________ revenue.
A. has; earns no
B. has; earns
C. has no; earns no
D. has no; earns
Answer: C
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When demand is inelastic and price decreases:
A) the effect of the decrease in price on total revenue dominates the effect of the increase in quantity demanded on total revenue; overall total revenue declines. B) the effect of the increase in quantity demanded on total revenue dominates the effect of the decrease in price on total revenue; overall total revenue increases. C) the effects of the decrease in price on total revenue and the corresponding increase in quantity demanded on total revenue perfectly offset one another; overall total revenue remains unchanged. D) quantity demanded and total revenue fall to zero.
A period when overall inflation rates are positive but falling is called:
A. disinflation. B. deflation. C. zero price level. D. inflation.
Economists concerned about the behavior of individual households, firms, and industries are studying:
A) microeconomics. B) macroeconomics. C) neither macroeconomics nor microeconomics D) the "forest" of economic behavior, rather than the "trees."
Which of the following was not a lesson from the 2007–2009 financial crisis?
A. Financial regulations were too “light” prior to the crisis. B. Excessive complexity made the financial system more fragile and dangerous. C. Both monetary policy and fiscal policy are needed in order for the economy to recover. D. Regulatory failures were based primarily on poor job performance.