You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The Shop's total revenue exceeds its total variable cost, but is less than its total cost. You should advise the firm to
A. produce in the short run to minimize its loss, but exit the industry in the long run.
B. cease production immediately because it is incurring a loss.
C. lower its price so that it can sell more units of output.
D. raise its price until it breaks even.
Answer: A
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
The reason the marginal cost curve eventually increases as output increases for the typical firm is because of
A. diseconomies of scale. B. increasing opportunity cost. C. diminishing marginal returns. D. diminishing marginal utility.
The rights of a co-owner to a share of a firm's profits are
a. protected under tort law b. protected under contract law c. not protected under any form of law d. protected under antitrust law e. less valuable than the costs of pursuing action against the company
"The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.". This statement is from:
a. Hayek b. Mises c. Friedman d. Samuelson e. None of the above