If a perfectly competitive firm finds that price is less than average variable cost, it should:
A. increase output until price equals marginal cost.
B. decrease output until price equals marginal cost.
C. shut down immediately.
D. not adjust output if marginal cost equals price.
Answer: C
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A simple economic model predicts that a fall in the price of bus tickets means that more people will take the bus. However, you observe that some people still do not take the bus even after the price of a ticket fell
a. Is the model incorrect? b. How would you test this model?
Futures contracts differ from forward contracts in that
A) future contracts ensures you will receive a certain amount of foreign currency at a specified future date. B) future contracts bind you into your end of the deal. C) future contracts allow you to sell your contract on an organized futures exchange. D) future contracts are a disadvantage if your views about the future spot exchange rate are to change. E) futures contracts don't allow you to realize a profit of a loss right away.
If expectations are rational, the difference between the actual rate of inflation and the expected rate of inflation will be zero
a. True b. False Indicate whether the statement is true or false
An example of a negative externality is:
A. smell of a pizza shop making pizza. B. the traffic created by a city hosting a popular event. C. people getting flu shots during flu season. D. All of these are examples of negative externalities.