A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize losses, the firm should:
A. shut down.
B. produce more than 1000 units.
C. continue producing 1000 units.
D. produce less than 1000 units.
Answer: C
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The above figure shows the labor market in an undeveloped nation. If the minimum wage is set at $5.00 per hour, what effect will it have on the market for low-skilled labor?
A) The minimum wage will have no effect when set above the equilibrium wage rate. B) The minimum wage will create a surplus of low-skilled labor. C) The minimum wage will create a shortage of low-skilled labor. D) The minimum wage will attract more labor to the low-skilled labor market and cause the wage rate to fall.
Some charge that third-degree price discrimination is unfair or that it reduces social welfare. Why does charging one group a lower price hurt anyone?
What will be an ideal response?
Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 10 percent,
a. the lender benefits from inflation, while the borrower loses from inflation. b. the borrower benefits from inflation, while the lender loses from inflation. c. neither the borrower nor the lender benefits from inflation. d. both the borrower and the lender lose from inflation.
The relationship that shows how much buyers of a product want to buy at each possible price, holding fixed all other factors is called:
A. a demand curve. B. elasticity of demand. C. demand function. D. an indifference curve.