In a perfectly contestable market in the long run, each firm
A. produces at the minimum point on its long-run average total cost curve.
B. earns a profit below its opportunity cost of capital.
C. avoids making capital expenditures.
D. All of the responses are correct.
Answer: A
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Bill owns a lawn-care company in Windermere, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed
At this price, how many lawns will Bill mow per week? A) more than 10 and less than 30 B) 30 C) 40 D) 50 E) 0
Under a price cap regulation, the regulated industry has an incentive to
A) operate efficiently and not inflate its costs. B) inflate costs. C) decrease its output. D) None of the above answers is correct.
A payment for a resource above its opportunity cost is known as: a. an interest payment. b. a sunk cost
c. featherbedding. d. an economic rent.
Explain why inflation degrades the information content of prices.
What will be an ideal response?