Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on
ingredients and other variable costs. Also for the past several months she has taken in $3,500 in monthly revenue. In the short run, Susan should
a. shut down her business, and in the long run she should exit the industry.
b. continue to operate her business, but in the long run she should exit the industry.
c. continue to operate her business, but in the long run she will probably face competition from newly entering firms.
d. continue to operate her business, and she is also in long-run equilibrium.
b
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Traditionally, the Federal Reserve can give emergency loans only to
A. manufacturing firms. B. securities firms. C. commercial banks. D. investment banks.
Which of the following statements is TRUE?
A) In the long run, the average cost curve is always downward sloping. B) In the long run, the quantities of all inputs are fixed. C) In the long run, the firms' fixed costs are greater than its variable costs. D) In the long run, all costs are variable costs.
In the textbook model of endogenous growth, in equilibrium, output grows at the rate of
A) sA - d. B) n + d. C) K. D) A.
Suppose that when a perfectly competitive firm produces 1,000 units of output, its total variable cost is $1,900. If the marginal cost of producing the 1,000th unit is $1.70, and if the market price of each unit of output is $1.70, then the firm should:
A. raise its price. B. continue to produce 1000 units. C. shut down. D. increase output.