Jimmy’s java shop operates in a monopolistically competitive market. Jimmy’s current output is where average costs are minimized. If this is the case, we would expect Jimmy to
A. increase output and lower price.
B. decrease output and Jimmy’s average costs would increase.
C. continue production at the current level as Jimmy’s is operating at his best outcome.
D. increase output and Jimmy’s average costs would decrease.
Answer: B
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Refer to Tax Problem. The deadweight loss due to a $10 per unit consumption tax is
Consider a perfectly competitive market were demand is Q = 100 - P and Supply is Q = P - 10. a. zero. b. $10. c. $25. d. $50.
A government policy to build bridges and dams is an example of a policy to promote economic growth by:
A. increasing human capital. B. improving technology. C. improving the social and legal environment D. increasing physical capital.
Which of the following statements is false?
A. Diversification can reduce risk but only by reducing the expected return. B. Diversification reduces idiosyncratic risk. C. Diversification can reduce risk. D. Diversification allocates savings across more than one asset.
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. Max's explicit cost amounts to $3,000 per
month more than his revenue. Should Max continue operating his business? A) Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor. B) Max should continue to run the tattoo parlor until his lease runs out. C) If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business. D) This cannot be determined without information on his revenue.