What is the short-run break-even price? What are economic profits at this price? Why would a firm be willing to operate permanently at this price?
What will be an ideal response?
Answer: The short-run break-even price is the price at which total revenue equals total costs, so that economic profits equal zero. The firm is willing to stay in business at zero economic profits because all opportunity costs are covered, including the opportunity costs of the entrepreneur's time and any other resources he or she brings into the firm. The zero economic profits are associated with a normal rate of return, and the entrepreneur cannot expect to do better anywhere else.
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The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
Factories owned by U.S. firms on the Mexican side of the U.S.-Mexico border are:
A. an important source of foreign direct investment in Mexico. B. not an example of foreign direct investment in Mexico. C. troubling for the Mexican government. D. harmful to Mexico's efforts to increase their economic growth.
The shutdown point is also referred to as the breakeven point
a. True b. False Indicate whether the statement is true or false
According to Matthew Slaughter, as reported in the Case in Point on outsourcing, which of the following is a reason that suggests outsourcing might actually increase domestic employment?
A) Reduced costs make domestic firms more likely to expand the quantities they produce. B) Lower costs may lead firms to increase the scale of their operations which could generate more domestic employment. C) A firm that engages in outsourcing is likely to increase its scope of operations. D) all of the above