The Taste Freeze Ice Cream Company is a perfectly competitive firm producing where MR = MC. The current market price of an ice cream sandwich is $5.00. Taste Freeze sells 200 ice cream sandwiches. Its AVC is $8.00 and its AFC is $3.00. What should Taste Freeze do?
A. Shut down and produce zero sandwiches because price is less than AVC.
B. Continue to produce because price exceeds AFC.
C. Decrease production so that AVC will decrease.
D. Increase production so that AFC will decrease.
Answer: A
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Globalization has given U.S. consumers a wider variety of gourmet food products from which to choose and has lowered the prices of these products in general
This, in turn, has encouraged consumers to buy more gourmet food items, which has ________ the amount of cooperative surplus for the buyers and sellers of gourmet food products. A) increased B) decreased C) not changed D) reduced to zero
Which of the following statements is correct?
A. The actual reserves of a commercial bank equal its excess reserves minus its required
reserves.
B. A bank's liabilities plus its net worth equal its assets.
C. When borrowers repay bank loans, the supply of money increases.
D. A single commercial bank can safely lend a multiple amount of its excess reserves.
Which of the following would be classified as an external cost?
A. You are not able to study at night because there is so much noise coming from the dorm room next to yours. B. As more firms began hiring computer programmers, the salaries of computer programmers increased, and therefore the firm's cost of production increased. C. A private firm will not provide national defense, as it is impossible to confine the benefits to only those individuals who have paid for it. D. When you purchase a prescription drug, you are not made fully aware of all the possible side effects that may result from taking the drug.
Which of the following does a social planner necessarily need to know to restore efficiency in a monopoly market?
A) The monopolist's marginal costs only B) The buyers' demand for a close substitute of the product sold in the market C) The monopolist's marginal revenue and the tax levied on the sale of the good D) The monopolist's marginal costs and the buyers' willingness to pay for the good