When price does not cover average total cost at any rate of output, the firm should shut down in the short run.
Answer the following statement true (T) or false (F)
False
A firm should shut down if it does not cover its average variable cost. When price is less than ATC but greater than AVC, a firm will lose less if it operates because it is covering some of its fixed costs.
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Which of the following best illustrates the free rider problem?
A) For every purchase of a $100 season pass, you are entitled to free entry to an amusement park for the entire summer. B) If your neighbors redo the landscapes in their yards, it is likely that the value of your house will increase. C) Since no one owns rhinos and rhinos are valued for their horns, rhinos can be hunted to extinction. D) Homeowners in a small neighborhood decide that security lighting is good for the neighborhood. One homeowner installs the lighting and asks you to contribute toward the cost, but you choose not to contribute.
If income decreases or the price of a complement rises
A) the demand curve for a normal good shifts leftward. B) the demand curve for a normal good shifts rightward. C) there is an upward movement along the demand curve for the good. D) there is a downward movement along the demand curve for the good.