Explain why a firm must consider variable costs rather than fixed costs, when deciding whether to produce
It will incur its fixed costs whether or not it operates. It will only incur variable costs if it operates, so the
relevant question is whether the marginal revenue from operating is large enough to cover these variable
costs. If the marginal revenue does not cover all of the variable costs, then the owner will have to cover
them, in addition to the fixed costs, out of his/her pockets.
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For most practical matters, economists assume that
A) individuals are risk neutral. B) individuals are risk lovers. C) individuals are risk averse. D) most individuals are risk lovers. E) most individuals are risk neutral.
A monopolist can:
a. produce as much or as little as it wants without affecting price. b. decide the price that will be charged in the market. c. provide discounts below market price to attract more customers. d. price its products by considering the possible reactions of future competitorsor firms that produce close substitutes for its output.
Florencia has decided to make computer literacy mandatory in high schools. This is expected to bring about a technological growth and cause: a. the long-run aggregate supply curve to shift rightward
b. the long-run aggregate supply curve to shift leftward. c. an upward movement along the long-run aggregate supply curve. d. a downward movement along the long-run aggregate supply curve.
Maintaining objectivity is easiest in:
A. the art of economics. B. positive economics. C. normative economics. D. subjective economics.