Spacely Sprockets, Inc, usually pays $1,000 for a million flanges, which it uses as inputs in the manufacture of sprockets. It also spends an average of $20 per million flanges on finding manufacturers and negotiating contracts. Spacely is capable of making its own flanges at a cost of $980 per million. Given these costs,
a. Spacely should continue to contract out for flanges
b. Spacely should start to manufacture its own flanges
c. it's not possible to say what Spacely should do
d. Spacely should stop paying the additional $20 to find and negotiate contracts and just buy the flanges outright for $1,000 per million
e. Spacely should move away from the use of flanges and toward an input that it can produce by itself
B
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When a binding price floor is placed on a good, some suppliers who want to sell the good cannot do so
a. True b. False Indicate whether the statement is true or false
Which of the following correctly describes the profit-maximizing level of output selected by a monopolistically competitive firm in the short run?
a. Output is set in the short run where marginal cost equals price. b. Output is set in the short run where marginal cost equals marginal revenue. c. Firms will shut down in the short run even if price exceeds average variable cost at the rate of output selected by the firm. d. Firms will shut down in the short run even if price equals marginal cost.
Suppose market demand and supply are given by Qd = 300 - 4P and QS = -50 + 3P. The equilibrium price is:
A. $60. B. $50. C. $40. D. $35.
If the price level doubled in a 23-year period, we can conclude that the average annual rate of inflation over that period was about 3 percent.
Answer the following statement true (T) or false (F)