Mrs. Smith is operating a firm in a competitive market. The market price is $6.50 . At her profit-maximizing level of output, her average total cost of production is $7.00, and her average variable cost of production is $6.00 . Which of the following statements about Mrs. Smith's firm is correct?
a. Mrs. Smith is earning a loss and should shut down in the short run.
b. Mrs. Smith is earning a loss but should continue to operate in the short run.
c. Mrs. Smith is earning a profit since the price is above the average variable cost.
d. Without knowing Mrs. Smith's marginal cost, we cannot determine whether she should stay in business or shut down.
b
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On the graph above, which pair of points best represents the impacts in the U. S. of the financial crisis and policy response from 2007 through 2008?
A) H to I B) K to G C) I to H D) K to F E) G to J
Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Which of the following gives the market-clearing curve for cereal?
A. Pc = 100 - (Pm/10) B. Pc = 8 - (Pm/10) C. Pc = 10 - (Pm/10) D. Pc = 10 + (Pm/10)
Knowing that most people do not care to be outliers, one way to get people to behave a certain way is to:
A. tell them everyone else does it. B. let them know it is a social norm to behave that way. C. encourage the behavior of the majority. D. All of these statements are true.
Scarcity
A. can be reduced with more efficient production methods. B. can not be avoided in the world. C. does not exist in the United States. D. applies only to developing countries.