If a firm shuts down, its
A. fixed costs remain unchanged.
B. revenue will fall to zero.
C. short-run variable costs will fall to zero.
D. All of the responses are correct.
Answer: D
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The arguments against the use of active stabilization policy include all of the following except:
a. the responsiveness of voluntary unemployment to changes in GDP. b. the existence of policy lags. c. weak macroeconomic forecasting abilities. d. the possibility of policy errors because of limited information.
Explain why the current abatement levels for the two sources do not achieve cost effectiveness.
Suppose that there are only two stationary sources in a given air quality region. The first source has been in existence for several years, while the second source is new. The following functions represent marginal abatement costs (MAC) for each polluting source: MACEX = 10.0 + 0.7A EX, MACN = 9.2 + 0.5A N, whereAEX is the percentage abatement level for the existing source, and AN is the percentage abatement level for the new source. Assume that the aggregate abatement standard (i.e., for the region as a whole) is set at 40 percent and that the two firms’ current abatement levels areAEX = 10 and AN = 30.
A rational decision maker will take only those actions for which the expected marginal benefit _____
a. is positive. b. is at its maximum level. c. is greater than or equal to the expected marginal cost. d. is less than the expected marginal cost. e. exactly equals the total cost.
Which of the following would reduce the money multiplier?
A. cash drains from banks B. bond purchases by the Fed C. reducing the reserve ratio D. bank reductions in desired reserve holdings