Widgets R Us, which is a price-taking firm, is currently producing 250 units of output. The market price is $3 per unit, the marginal cost of the 250th unit is $2.75, average total cost is $3.50 per unit, and average variable cost is $2.50 per unit
What advice should you give Widgets R Us? A) Increase output to reduce losses.
B) Continue to produce 250 units in the short run.
C) Shut down to minimize losses.
D) Decrease output to 200 units.
A
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Suppose that firms are paying their "efficiency wage" rate and AD shifts leftward. Firms that lower wages and maintain production would
A) achieve lower profits since worker efficiency would fall and total wages paid increase. B) achieve lower profits since worker efficiency would fall and wages per unit of output increase. C) achieve higher profits. D) achieve lower per unit wage costs.
Suppose there is an increase in the price of oranges. Which of the following is a possible cause?
a. increase in income b. increase in the price of sugar, a complement of oranges c. decrease in the price of tangerines, a substitute for oranges d. freeze in Florida e. favorable weather pattern