A perfectly competitive firm faces a market clearing price of $150 per unit. Average total costs are at the minimum value of $200 per unit at an output rate of 100 units. Average variable costs are at the minimum value of $100 per unit at an output rate
of 50 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is
A) 75 units, at which the firm earns zero economic profits per unit sold.
B) 75 units, at which the firm earns negative economic profits per unit sold.
C) 75 units, at which the firm earns positive economic profits per unit sold.
D) 50 units, because price is less than average variable costs.
Answer: B
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If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is to produce less of the other
Indicate whether the statement is true or false
According to the Taylor Rule
What will be an ideal response?
Scarcity and shortages differ in that
A. scarcity is caused by natural disasters and shortages are caused by mistakes people make. B. scarcity is a condition of human life while shortages are usually temporary phenomena related to an imbalance between the amount desired and the amount produced. C. shortages apply to resource markets while scarcity applies to product markets. D. scarcity is a type of shortage but shortage is a broader concept.
Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. When these two individuals engage in trade, it would be advantageous for both if:
a. Bob specializes in the production of toys and Bill specializes in car repairing. b. Bob specializes in car repairing and Bill specializes in the production of toys. c. they specialize only in car repairing. d. they specialize only in the production of toys. e. they distribute their working hours evenly between the production of two goods.