In which scenario can a perfectly competitive firm continue to produce in the short term, even though it would mean economic losses (where P = price, AVC = average variable costs, and ATC = average total cost)?
a. P < AVC but P > ATC
b. P = AVC + ATC
c. P > ATC – AVC
d. P > AVC but P < ATC
d. P > AVC but P < ATC
If P > AVC but P < ATC, then the firm continues to produce in the short run, resulting in economic
losses.
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Which of the following is not a type of trade restriction?
a. low-interest loans to foreign buyers b. export subsidies to domestic producers c. restrictive health and safety standards d. domestic content requirements e. economies of scale
Sellers have a strong incentive to lobby government for legal restrictions that would reduce the intensity of competition in their market because
a. the firms wish to be more efficient than competition will permit. b. competition tends to result in lower prices and lower profits. c. legal restrictions that lessen competition in a market generally benefit consumers. d. the firms fear that intense competition will lead to higher profits that will attract additional rivals into the market.
If a binding price floor is imposed on the video game market, then
a. the demand for video games will decrease. b. the supply of video games will increase. c. a surplus of video games will develop. d. All of the above are correct.
Which of the following subsidies is prohibited under World Trade Organization (WTO) rules?
A. Subsidies to assist firms in meeting environmental regulations B. Subsidies to encourage firms in a developed country to export more C. Subsidies to assist disadvantaged regions within the exporting country D. Subsidies to research and development