Explain why a firm's shut-down decision does not incorporate the fixed costs of the production facility.
What will be an ideal response?
A firm's fixed costs are fixed no matter how many units of output the firm produces. Thus, the fixed costs of a production facility are not avoidable even when the firm is not using its production facility.
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The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm is producing 1 pound of cookies, to maximize its profit it will
A) increase its output. B) decrease its output. C) continue producing 1 pound of cookies. D) shut down.
Aggregate supply in the new classical aggregate supply
a. is vertical in the short-run. b. is horizontal in the short-run. c. is upward sloping in the short-run. d. None of the above
The proliferation of Internet usage serves as an example of a favorable supply shock
a. True b. False Indicate whether the statement is true or false
The change in total product occurring when a variable input is increased and all other inputs are held constant is
A. marginal product. B. average total cost. C. average product. D. marginal cost.