Why might a business owner keep their business open but let it deteriorate, rather than shut it down? Will this profitability last?
What will be an ideal response?
For some business owners, keeping their businesses open will result in lesser losses than shutting down the businesses. However, in many cases the revenue from keeping a business open is not enough to cover the total costs of running it. To cover the gap, the business owner will reduce or stop maintenance of the facility to reduce costs and make the business profitable again. However, this profitability will not last, as consumers are willing to pay less and less to the business due to its deteriorated state. Thus revenue will fall and, even with a zero maintenance cost, the business will no longer be profitable, so the owner will then finally shut it down.
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High inflation can do which of the following?
A) increase shoeleather costs B) distort consumption choices C) arbitrarily redistribute income D) all of the above
To be unemployed is to be
A) without a job, but actively looking for a job. B) without any source of income. C) without an identity. D) all of the above.
Refer to Figure 24-1. Ceteris paribus, an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
Assume a firm is able to use an optimal two-part tariff
a. Is the outcome economically efficient? Why or why not? b. What happens to consumer surplus? c. Does this represent perfect price discrimination? Why or why not? What will be an ideal response?