“Assuming the long-run average cost curve is U shaped, a firm will always seek to operate at the lowest point on the long-run average cost curve.” True or false?
What will be an ideal response?
False. The optimal point in the long run depends on the demand for the firm’s product. If demand is small, the firm will prefer a relatively small plant and will operate to the left of minimum LRAC. A firm anticipating a large demand may find it optimal to produce beyond minimum LRAC. Later, there will be a tendency to operate at minimum LRAC when a firm faces competition, but there is no such discipline on the firm in this chapter.
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When the price of a product exceeds the marginal cost of producing it, producers have a
A) consumer surplus. B) producer surplus. C) consumer shortage. D) producer shortage. E) deadweight surplus.
When quantity supplied is not very responsive to a change in price, supply is
A) elastic. B) unit-elastic. C) inelastic. D) income sensitive.
We all know that the United States has the highest per capita health care spending in the world. Which country has the second highest?
a. Japan. b. Germany. c. Switzerland. d. Great Britain. e. France.
According to the equation of exchange, economic logic would indicate that in order to avoid inflation, an increase in V must be accompanied by
A. an increase in spending by the government. B. an increase in imports. C. a decrease in the supply of money. D. a decrease in unemployment.