"A perfectly competitive firm will shut down if the price falls below its average total cost." Do you agree? Explain
What will be an ideal response?
A perfectly competitive firm will not shut down as far as the price is above its average variable cost. If the price is below the ATC but above the AVC, the firm can cover part of its fixed cost if it continues to operate. If the firm shuts down, it incurs an economic loss equal to total fixed cost. So as long as the price is above the AVC, the firm will have a smaller economic loss if it continues to operate than if it shuts down.
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Which of the following changes would cause American net exports to decrease?
A) A decrease in the real value of the dollar B) A decrease in American income C) An increase in foreign income D) A shift in demand by American consumers away from domestically produced goods
There are frequently market solutions that the government can use to deal with externalities
a. True b. False Indicate whether the statement is true or false
In the short run it is impossible for an expansion of output to increase:
A. average total cost. B. average fixed cost. C. marginal cost. D. average variable cost.
Applying the concept of opportunity cost to the pollution of a lake, an economist probably would conclude that:
A. pollution should be eliminated as long as the opportunity cost of a cleanup exceeds the cost of the resources required for the cleanup. B. pollution should be eliminated as long as the benefit from a cleanup exceeds the opportunity cost. C. no pollution in the lake should be eliminated regardless of benefit. D. all pollution in the lake should be eliminated regardless of cost.