If a perfectly competitive firm's total revenue is less than its total variable cost, the firm
A) should raise its price above its average variable cost.
B) should continue to produce and increase its demand.
C) should stop production by shutting down temporarily.
D) should adopt new technology in order to lower its costs of production.
Answer: C
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If a consumer is relatively insensitive to changes in the price of a good, then the consumer's demand for the good is
A) elastic. B) unit elastic. C) inelastic. D) perfectly elastic.
Given a nominal interest rate of 8 percent, in which of the following cases would you earn the highest after-tax real interest rate?
a. Inflation is 5 percent; the tax rate is 40 percent. b. Inflation is 4 percent; the tax rate is 30 percent. c. Inflation is 3 percent; the tax rate is 45 percent. d. Inflation is 2 percent; the tax rate is 50 percent.