Explain why any firm must generate enough revenue to cover its variable costs in the short run
What will be an ideal response?
The reason is that if it can't cover its variable cost it is better off for the firm to shut down. At least under this circumstance the maximum amount the firm would lose would be an amount equal to its fixed costs. However, if a firm continued to produce even while revenues were short of variable costs this would result in greater losses than the losses associated with shutting down.
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Which of the following will shift the supply curve for USB flash drives to the right?
A. an increase in the number of sellers B. an increase in consumers' incomes C. an increase in the cost of resources used to manufacture USB flash drives D. an increase in the number of buyers
Computing the CPI is important because ________
A) it is a very accurate and error-free measure of the cost of living B) it helps predict spending patterns for particular goods and services C) government uses it to index entitlements, such as social security benefits, so that beneficiaries do not lose purchasing power in periods of inflation D) all of the above E) none of the above
An increase in total factor productivity
A) increases consumption, increases output, and increases the real wage. B) reduces consumption, increases output, and increases the real wage. C) reduces consumption, increases output and reduces the real wage. D) reduces consumption, reduces output, and reduces the real wage.
A lower real interest rate ________ investment spending and ________ consumption spending.
A. increases; decreases B. decreases; decreases C. decreases; increases D. increases; increases