Suppose Robin's Clock Works produces in a perfectly competitive market. Suppose the average total cost of clocks is $95, the average variable cost of clocks is $90, and the price of clocks is $85. If the firm is producing the level of output where marginal cost equals price, then in the short run the firm:
A. should shut down.
B. should continue to produce since total revenue exceeds total variable cost.
C. is earning a positive economic profit.
D. can increase profit by increasing output.
Answer: A
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The lack of a long-run tradeoff between the unemployment rate and the inflation rate means that
A) the natural unemployment rate cannot change. B) only a decrease in the inflation rate would bring a reduction in the natural unemployment rate. C) only fiscal policy is effective to lower the natural unemployment rate. D) only monetary policy is effective to lower the natural unemployment rate. E) an increase in the inflation rate would not bring a reduction in the natural unemployment rate.
Demand curves slope ________ because as the price increases and other things remain the same, the quantity demanded ________
A) downward; decreases B) downward; increases C) upward; decreases D) upward; increases E) downward; does not change