Why does it make sense for unprofitable firms to stay in business?
What will be an ideal response?
Even if a firm is losing money, it might still be better off producing. If the firm can recover its variable costs and some of its fixed costs by producing (that is, if the price it can receive exceeds the average variable cost of production), then it loses less by producing optimally than by shutting down and eating its fixed costs.
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Predatory pricing is a well-defined antitrust offense
Indicate whether the statement is true or false
A market economy is an economy where:
a. economic decisions are passed down from government authority and resources are owned by the government. b. economic decisions are economic decisions are centralized, resources are owned by private individuals, and businesses supply goods and services based on demand. c. economic decisions are decentralized, resources are owned by private individuals, and businesses supply goods and services based on demand. d. economic decisions are passed down from government authority and resources are owned by individuals.
A tax that is imposed at each stage of production is a
a. sales tax b. excise tax c. high-incidence tax d. value-added tax e. none of the above
Refer to Figure 21-2. Which of the following is consistent with the graph depicted above?
A) There is a shift from an income tax to a consumption tax. B) The government runs a budget surplus. C) New government regulations decrease the profitability of new investment. D) An expected expansion increases the profitability of new investment. Figure 21-3