The owner of Tie-Dyed T-shirts, a perfectly competitive firm, hires you to give him economic advice. He tells you that the market price for his shirts is $15 and that he is currently producing 200 shirts at an AVC of $10 and an ATC of $20. You tell him he should continue to operate in the short run because
A. he is earning an economic profit of $4,000.
B. he has to pay this fixed costs of $2,000 if he shuts down which is greater than his loss when he operates.
C. In fact you do not tell him to operate-he should shut down since he has a loss.
D. his loss from operating in only $2,000 which is less than his loss if he shuts down.
Answer: B
You might also like to view...
Economic theory is a necessity, not a luxury. This statement is true because theory
A. always leads to practical and useful policy. B. can prevent depressions in the economy. C. substitutes for vast amounts of data. D. provides a structure for organizing and analyzing data. E. always leads to accurate predictions.
Player 1 and Player 2 are playing a game in which Player 1 has the first move at A in the decision tree shown below. Once Player 1 has chosen either Up or Down, Player 2, who can see what Player 1 has chosen, must choose Up or Down at B or C. Both players know the payoffs at the end of each branch. 
If Player 2 could make a credible commitment to choose either Up or Down when his or her turn came, then what would Player 2 do?
A. Player 2 would commit to choosing Down. B. Player 2 would commit to choosing Up. C. Player 2 would not commit to choosing either strategy. D. Player 2 would commit to mimicking Player 1's strategy.
If the MPC = 0.9, the multiplier would be
A) 0.1. B) 2. C) 9. D) 10.
A tariff has the effect of giving ________ a larger share of the domestic market
a. domestic consumers b. foreign consumers c. domestic producers d. foreign producers e. no producers or consumers