The owner of Tie-Dyed T-shirts, a perfectly competitive firm, hires you to give him economic advice. He tells you that the market price for his shirts is $15 and that he is currently producing 200 shirts at an AVC of $10 and an ATC of $20. You tell him he should continue to operate in the short run because
A. he is earning an economic profit of $4,000.
B. In fact you do not tell him to operate-he should shut down since he has a loss.
C. his loss from operating in only $2,000 which is less than his loss if he shuts down.
D. he has to pay this fixed costs of $2,000 if he shuts down which is greater than his loss when he operates.
Answer: D
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A) one; scarcity B) two; ceteris paribus C) three; scarcity D) one; ceteris paribus E) one; absence of trend
Fill in the blank: Information is a ________ good
A) free B) scarce C) futile D) non-economic
For a seller who is a price taker, marginal revenue is always
A) less than marginal cost. B) more than marginal cost. C) the same as marginal cost. D) less than price. E) the same as price.
What is accounting profit?
A) gross revenue minus explicit and implicit costs B) the same as economic profit C) gross revenue minus implicit costs D) gross revenue minus explicit costs