Figure 5.4 shows a firm's marginal cost, average total cost, and average variable cost curves. At Q = 50, the average fixed cost is:
A. $30.
B. $40.
C. $50.
D. $60.
Answer: D
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What is the difference between a tariff and a quota?
When the market mechanism is allowed to operate freely, prices will determine
A. The mix of output to be produced, the resources to be used in the production process, and for whom the output is produced. B. Only for whom the output is produced and the mix of output to be produced. C. Only the resources to be used in the production process and for whom the output is produced. D. Only the mix of output to be produced and the resources to be used in the production process.
Necessities Versus Luxuries
What will be an ideal response?
Aggregate demand decreases and real output falls but the price level remains the same. Which factor would most likely contribute to downward price inflexibility?
A. Menu costs. B. Lower interest rates. C. An increase in aggregate supply. D. The real-balances effect.