Are the terms "shutdown" and "exit" synonymous? What is the optimal shutdown rule for a firm?
What will be an ideal response?
No, the terms "shutdown" and "exit" are not synonymous. Shutdown refers to a short-run decision to not produce anything during a specific period of time. When a firm shuts down, it still incurs its fixed costs. On the other hand, exit refers to a long-run decision by a firm to leave the market. The optimal shutdown rule for a firm suggests that a firm should shut down if the price of the good it produces falls below its average variable cost. In situations, where the price is less than the average variable cost, for every unit of a good that the firm sells, it is paying its variable inputs more than what it is receiving from the sale of the good. As a result, the firm would lose more than the fixed cost that it would lose by shutting down—it would also lose a portion of the variable cost.
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If an economy produced 220 pounds of jelly beans at $5 per pound and 90 pounds of gum drops at $2 per pound in 2016, its real gross domestic product (GDP) was
A) 310 pounds of candy. B) $180. C) $1,100. D) $1,280.
Which of the following equations correctly measures GDP in an economy?
A) GDP = C + I + G + NX B) GDP = C + I + G + X C) GDP = C + net I + G + NX D) GDP = C + G + I - taxes
According to the above figure, if steel mills ignore the cost of pollution, the equilibrium quantity of steel will most likely be
A) Q1. B) Q2. C) Q2 - Q1. D) none of the above.
The three noteworthy features of corporations’ legal status include all of these except
A. how they are taxed. B. special limits are placed on the losses that may be incurred by those who invest in corporations. C. the corporation is a distinct entity separate from its owners. D. they may invest in the stock market and acquire financing.