Suppose that a firm maximizes its profits by producing a quantity of 20 units. The market price is $5. The firm's variable costs are $70 and its fixed costs are $40. What should the firm do in the short run? In the long run?
What will be an ideal response?
Alas, the firm is earning negative profits in the short run. However, the firm is better off producing and losing $10 than shutting down and losing $40. So it should produce in the short run. In the long run, the firm need not renew its fixed cost obligations, and it will shut down.
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Answer the following statement(s) true (T) or false (F)
1. For the first time in U.S. history, the EPA has set GHG emissions standards for passenger cars and light-duty trucks for model years 2012 through 2016 and for medium- and heavy-duty vehicles for model years 2014 through 2018. 2. Under the new GHG emissions standards for mobile sources, light-duty vehicles will have to achieve an average emissions level of 250 grams of carbon dioxide (CO2) for model year 2016. 3. The two new national programs aimed at improving fuel efficiency and reducing GHG emissions are strictly command-and-control with no market-based initiatives. 4. Under the Clean Air Act, the emissions controls on mobile sources were set using benefit-cost analysis.
Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. Which of the following is true? a. Mutually beneficial trade between Karl and Adam could take place at an exchange rate of 1 ton of apples to 1 1/2 ton of oranges. b. Mutually beneficial trade between Karl and Adam could take place at an exchange rate
of 1 ton of oranges to 1 1/2 ton of apples. c. both a. and b. are true. d. neither a. nor b. are true.
Which of the following is not true of tax loopholes?
A. They reduce the progressivity of the federal income tax. B. They encourage particular patterns of behavior. C. They include exemption of interest earned on municipal bonds. D. They reduce excess burdens.
One reason stagflation is difficult to recover from is because:
A. less output requires less inputs to be hired. B. prices tend to adjust more quickly downward than upward. C. wages are sticky downward. D. input prices increase with output prices.