Under what conditions should a competitive firm shut down in the short run?
What will be an ideal response?
When market price is below average variable cost at the output where marginal revenue equals marginal cost, the firm should shut down in the short run.
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Suppose that the implicit cost for a business was $1,000 and the explicit cost was $5,000 and that the firm sold 1,000 units of its products at $6 per item. We can conclude that the firm's
A) accounting profit was $6,000, and its economic profit was $0. B) accounting and economic profits were both $0. C) accounting profit was $1,000, and economic profit cannot be determined. D) accounting profit was $1,000, and economic profit was $0.
Suppose the money multiplier in the United States is 3. Suppose further that if the Fed increases the discount rate by 1 percentage point, banks initially change their reserves by 400. To reduce the money supply by 4,200 the Fed should:
A. raise the discount rate by 10.5 percentage points. B. raise the discount rate by 3.5 percentage points. C. reduce the discount rate by 3.5 percentage points. D. reduce the discount rate by 10.5 percentage points.