In which market structure will a firm choose not to shut down when price is less than average variable cost?
A) perfect competition
B) monopoly
C) monopolistic competition
D) All of the above. Any firms will shut down when P < AVC.
Answer: D
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Suppose the government increases its expenditures by $100 million and finances the resulting deficit by selling bonds. Then the LM curve will
A) shift rightward. B) shift leftward. C) become steeper. D) None of these.
Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium
a. interest rates and the equilibrium quantity of loanable funds rise. b. interest rates rise and the equilibrium quantity of loanable funds fall. c. interest rates fall and the equilibrium quantity of loanable funds rise. d. interest rates and the equilibrium quantity of loanable funds fall.
In order for the law of diminishing returns to be present, we must have:
a. at least one factor of production to be fixed. b. output decreasing as more laborers are hired. c. the price of labor increasing as more workers are hired. d. simultaneous changes in labor and capital. e. double the output when labor input is doubled.
For a monopolistic competitor:
A. P = MC in long-run equilibrium. B. P = MR in long-run equilibrium. C. P > ATC in long-run equilibrium. D. P = ATC in long-run equilibrium.