If in the short run the firm incurs zero marginal cost, then the firm will:
A. never shut down.
B. shut down if the price is greater than the average variable cost.
C. shut down if the price is less than the average total cost.
D. shut down if the marginal cost equals the marginal revenue.
Answer: A
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In a 2-good model, suppose that all individuals have tastes that are quasilinear in either good 1 or in good 2 (with some of each represented in the group.) The quasilinearity of everyone's tastes is then sufficient to insure that we can treat the group as if it were a single representative consumer.
Answer the following statement true (T) or false (F)
Which of the following statements best describes how economic growth is represented in the AD/AS diagram?
a. In the AD/AS diagram, long-run economic growth due to productivity increases over time will be represented by a dramatic shift to the right of aggregate supply. b. In the AD/AS diagram, long-run economic growth due to productivity increases over time will be represented by a gradual shift to the right of aggregate supply. c. In the AD/AS diagram, short-run economic growth due to productivity increases over time will be represented by a dramatic shift to the right of aggregate supply. d. In the AD/AS diagram, short-run economic growth due to productivity increases over time will be represented by a gradual shift to the right of aggregate supply.
Which of the following does not apply to a firm that has shut down in the short run?
a. Variable cost is zero. b. Total revenue is zero. c. Total cost exceeds total revenue. d. Total cost is zero. e. Fixed cost is positive.
Which of the following assumptions is required for obtaining unbiased random effect estimators?
A. The idiosyncratic errors are heteroskedastic. B. The unobserved effect is independent of all explanatory variables in all time periods. C. The idiosyncratic errors are serially correlated. D. The unobserved effect is correlated with the explanatory variables.