The figure above shows cost curves for a perfectly competitive firm. Suppose that market price is $2.60. A firm producing 800 units of output
A. is earning the maximum amount of profit, $2,080.
B. should produce 500 units of output instead, to earn profits of $500.
C. should produce 1100 units of output instead, to earn profits of $1,100.
D. should shut down
E. is earning the maximum amount of profit, $880.
Answer: C
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A) changes in monetary policy B) changes in fiscal policy C) changes in expected inflation D) all of the above E) none of the above
The primary motivation for private foreign investment in developing nations is
A. the potential for high rates of return. B. to do research in countries with fewer social regulations. C. to improve the standard of living for workers. D. to eradicate poverty.
To maximize profit, a firm in monopolistic competition will produce the quantity where marginal revenue
A) is greater than marginal cost. B) equals zero. C) is less than marginal cost. D) equals marginal cost. E) equals average total cost.
The costs of disinflation would be low if
A) expected inflation falls as inflation falls. B) wage and price controls were used. C) the Phillips curve were nearly horizontal. D) the Phillips curve adjusted slowly to changes in inflation.