Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs
First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Should Homer's shut down in the short run? A) Yes, because he is incurring an economic loss.
B) Yes, because he cannot cover all of his fixed costs.
C) No, because is making positive economic profit.
D) No, because he can cover all of his variable costs.
D
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Refer to the above figure. An unregulated natural monopolist would choose
A) output rate of Q1 and price P2. B) output rate Q1 and price P5. C) output rate Q3 and price P3. D) output rate Q4 and price P1.
Deficit financing
A) is when the government adjusts taxes to raise money to pay for government projects. B) is the mechanism behind the Laffer curve. C) is how the automatic stabilizers work. D) is when discretionary fiscal policy leads to spending more than is collected in taxes.