Prostitution is legal in Churchill County, Nevada, but a referendum threatened to close two brothels (prostitution businesses) in that county. What idea from Chapter 1 of the text does this story best illustrate?
A. Sunk costs do not matter in making decisions.
B. Microeconomics and macroeconomics are very much interrelated.
C. Social and political forces sometimes rein in market forces.
D. Marginal revenue should equal marginal cost
Answer: C
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Marginal revenue is defined as
a. the accumulated revenue associated with production b. ?TR/?Q c. the change in profit associated with another unit of output produced d. ?TC/?Q
If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run
Indicate whether the statement is true or false
The argument that developing countries should nurture their infant domestic industries by protecting them from foreign competition is known as
A) the infant industry argument. B) the escape clause hypothesis. C) preservation of the home market. D) institutional fair trade policy.
A firm currently has 5 workers each paid $15 per hour. If it decides to hire a 6th worker, the hourly wage increases to $18 for all workers. The 6th worker is expected to contribute to around $40 worth of output. Based on this information, the firm should
a. Hire the 6th worker since MR>MC
b. Not hire the 6th worker since MR>MC
c. Not hire the workers since MR