Exhibit 8-8 A firm's cost and marginal revenue curves
In Exhibit 8-8, product price in this market is fixed at $35. This firm is currently operating where MR = MC. What do you advise this firm to do?
A. This firm should shut down.
B. This firm could increase profits by increasing output.
C. This firm could increase profits by decreasing output.
D. This firm should continue to operate at its current output.
Answer: D
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Indicate whether the statement is true or false
Consider the US market for chocolate, a market in which the government has imposed a price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling? a. a government study that shows that consuming chocolate increases the incidence of cancer. b. a large increase in the size of the cocoa bean crop; cocoa beans are used to produce
chocolate. c. South American cocoa bean producers refuse to ship to chocolate producers in the US. d. a sharp drop in consumer income; chocolate is a normal good.