Governments can eliminate market surpluses through the imposition of price floors.
Answer the following statement true (T) or false (F)
True
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Which of the following is true if a firm shuts down? i. The price is less than minimum average variable cost. ii. The firm is able to avoid an economic loss. iii. The firm incurs a loss equal to its total variable cost
A) i only B) i and ii C) i and iii D) iii only E) ii only
If Freedonia changes its laws to allow international trade in software and the world price is lower than its domestic price, then it must be the case that
a. both consumer surplus and producer surplus increase. b. consumer surplus increases and producer surplus decreases. c. consumer surplus decreases and producer surplus increases. d. both consumer surplus and producer surplus decrease.
As a consumer moves down one of her indifference curves, her satisfaction:
a. falls. b. rises. c. remains unchanged. d. first falls, then levels out.
One of the problems created by price floors set above the equilibrium is:
A. the effect on firm profitability. B. firms don't have incentives to reduce costs. C. the creation of surplus. D. how to cope with the shortages.