When price is less than average variable cost at the profit-maximizing level of output, a firm should:
A) continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the short run.
B) continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the long run.
C) shutdown, because it will lose nothing in that case.
D) shutdown, because it cannot even cover all of its variable costs let alone its fixed costs if it stays in business.
D
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The phrase "a weaker U.S. dollar" means that the dollar
a. has been depreciating b. has been appreciating c. is not in equilibrium on the foriegn exchange market d. is fluctuating greatly e. buys less than one unit of a foreign currency
Consider the market for medical doctors. Suppose the opportunity cost of going to medical school increases for many individuals. Suppose it generally takes about ten years to become a practicing doctor. Holding all else constant, in ten years the equilibrium wage for doctors will
a. increase. b. decrease. c. not change. d. It is not possible to determine what will happen to the equilibrium wage.
Market equilibrium refers to a situation in which market price
a. is high enough to allow firms to earn a fair profit. b. is at a level where there is neither a shortage nor a surplus. c. is low enough for consumers to buy all that they want. d. is just above the intersection of the market supply and demand curves.
A short-run open-economy model with demand shocks can analyze the effect on _____ if output prices and factor prices are sticky.
A) inflation B) real economic activity (real GDP and unemployment) C) long-run variables D) expectations