How does a firm in monopolistic competition decide whether to operate at a loss or shut down in the short run?
What will be an ideal response?
A firm in monopolistic competition will continue to operate in the short run as long as the price it charges is sufficient to cover variable costs. If it is not, the firm will shut down and suffer losses equal to its fixed costs. Incidentally, this rule applies to a firm operating in any type of market structure.
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When average variable cost is at its minimum level, marginal product _________
A. equals average product B. exceeds average product C. is less than average product D. is at its maximum level
In the event of a recession, which of the following is the most likely policy stance of those who advocate a passive approach to economic policy?
a. Cutting taxes b. Increasing government spending c. Reducing interest rates d. Increasing the money supply e. Doing nothing