Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds this firm?s marginal and average variable costs. To maximize profits, Cathy's should
A. make no adjustments as they are already maximizing their profits.
B. increase their output.
C. stop producing since it is earning a loss.
D. decrease their output.
Answer: B
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When Cody went to the physician with a sore elbow, after hearing Cody's symptoms and examining the elbow manually, Cody's physician had two options: (1) prescribe an anti-inflammatory drug and advise Cody to abstain from vigorous physical activity for a period; or (2) advise Cody to undergo a magnetic resonance imaging (MRI) exam, a costly diagnostic procedure. Which of the following physicians is more likely to recommend option 2?
A. A physician who is concerned about the marginal cost of an MRI. B. All physicians would recommend option 2. C. A physician who is compensated under a conventional health insurance plan. D. A physician who is part of an HMO.
Why is a production possibilities frontier bowed out (concave)?
A) The bowed shape reflects constant opportunity cost. B) The bowed shape reflects decreasing opportunity cost. C) The bowed shape indicates that opportunity cost at first decreases at a decreasing rate, and then begins to decrease at an increasing rate. D) The bowed shape indicates that opportunity cost at first increases at a decreasing rate, and then begins to increase at an increasing rate. E) The bowed shape reflects increasing opportunity cost.
In the equation of exchange, PQ represents: a. the dollar value of all final goods and services sold in a country in a given year. b. the price index times nominal GDP
c. real GDP. d. the price level times the velocity of money
When there is a shortage
A. quantity demanded is greater than quantity supplied. B. quantity supplied is greater than quantity demanded. C. quantity demanded is equal to quantity supplied.