If a business firm continues to sustain losses, what usually happens in a market economy?
A) It remains in business and the resources it is using continue to be employed.
B) It reorganizes as a government-supported organization and the resources continue to be employed.
C) It goes out of business and the resources it was using become available for use in other areas.
D) It reorganizes as a nonprofit organization.
C) It goes out of business and the resources it was using become available for use in other areas.
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Refer to Excise Subsidy. The amount of the subsidy paid to firms is given by
The following questions refer to the accompanying diagram which shows the effects of an excise subsidy given to firms. The initial price and quantity are P0 and Q0, respectively. After the subsidy is granted, the equilibrium quantity is Q1, firms receive the price Ps, and consumers pay the price Pd.
a. area A + B + E + H.
b. area B + C + D + E + F + G.
c. area D.
d. area F + G + I + J.
The formula for the tax multiplier is
A) (1 + b) / (1 - b). B) 1 / (1 - b). C) -b / (1 - b). D) b / (1 - b).
The economic efficiency rule requires production of the quantity of output where:
a. profit is maximized b. marginal social benefit is maximized c. marginal social benefit equals marginal social cost d. the excess of marginal social benefit over marginal social cost is maximized
Which of the following policies is supported by the idea that producers and workers will demand higher prices and wages when they see the money supply expanding?
A. Discretionary policy B. Fixed rules C. The Fed's eclecticism D. Fiscal policy