What is the relationship between a firm's supply curve, its marginal cost curve, and its average variable cost curve?
What will be an ideal response?
The firm will produce output as long as the price is greater than the minimum AVC. It will choose the level of output where MC = P, which means the firm's supply curve is the firm's MC curve above minimum AVC and along the vertical axis, producing zero, below the minimum AVC.
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In 1931, a politician was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 195 for 2005. The politician’s 1931 salary was equivalent to a 2005 salary of about
a) $962,171 b) 1,125,008 c)1,154,262 d)1,455,995
Jane started eating more junk food and taking less care of her health after she bought life insurance. Her behavior is an example of ________
A) moral hazard B) adverse selection C) the paradox of thrift D) the free-rider problem