Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:
A. minimizes losses by producing at the minimum point of its AVC curve.
B. maximizes profits by producing where MR = ATC.
C. should close down immediately.
D. should continue producing in the short run but leave the industry in the long run if the
situation persists.
Answer: D
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The discount rate:
A. is the rate of interest charged by the Fed when it lends money to private banks. B. is the reduction in the prime rate that big banks provide to corporate borrowers. C. is always equal to the market rate minus the core rate of inflation. D. is the rate that private banks charge other private banks for a loan.
A breakdown of financial markets can result in
A) financial stability. B) rapid economic growth. C) political instability. D) stable prices.