Exhibit 7-10 Price and cost data for a firm
Q
P
AVC
ATC
MC
0
$12
?
?
?
1
12
3
5
5
2
12
5
6
7
3
12
7.3
8
12
4
12
9.5
10
16
In Exhibit 7-10, the maximum possible total profit is:
A. $36.
B. $24.
C. $12.
D. $8.
Answer: C
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What will be an ideal response?
When a negative externality exists, the private market produces
A) products at a low opportunity cost. B) less than the economically efficient output level. C) products at a high opportunity cost. D) more than the economically efficient output level.
When interest rates come down,
a. people on average are better off since borrowing is now less expensive. b. people on average are worse off since the income of lenders will now decrease. c. social welfare is left unchanged since what borrowers gain is exactly offset by what lenders lose. d. people on average may or may not be better off, depending on how high the rate was to begin with.
The existence of the “underground economy” causes measured GDP to overestimate actual output.
Answer the following statement true (T) or false (F)