When the demand for a product falls, why do costs of production go down in an increasing cost industry?
When the demand falls, surplus resources will be available in this industry. The input markets for this increasing cost industry will not clear at their existing prices, and they will have to fall. Suppliers of raw materials would prefer to sell at lower prices than to not sell at all. Similarly, we would expect workers to prefer lower wages to unemployment. For these reasons, the long-run supply curve is upward sloping, whether firms are experiencing an increase or a decrease in demand.
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Using the figure above, which of the following statements are correct?
i. When 3 haircuts are produced, the firm's ATC is $10. ii. If the firm charges each customer the same price for a haircut, the price of a haircut is $14. iii. The firm is NOT a perfect competitor. A) i only B) ii only C) i and ii D) i and iii E) i, ii, and iii
What characteristic is shared by both sole proprietorships and partnerships?
a. They both tend to be large businesses. b. They both face unlimited liability. c. They both have just one owner. d. They both face limited liability. e. They both have just two owners.
When each person specializes in producing the good in which he or she has a comparative advantage, each person can gain from trade but total production in the economy is unchanged
a. True b. False Indicate whether the statement is true or false
If a tax cut of 3 percent causes the output supplied to increase by 6 percent, the absolute value of the tax elasticity of supply is
A. 6.0. B. 0.5. C. 18.0. D. 2.0.