A firm observes that in order to minimize the average cost, it must produce 25,000 units of output. Suppose the government imposes a specific tax on the output of the firm
Will the output level required to minimize the average cost increase, decrease, stay the same or is it uncertain? Can you tell how much the minimum average cost will change by? Explain.
The specific tax results in a parallel vertical shift of the average cost by the amount of the tax. Therefore, the minimum point will shift up by precisely the tax. The output level which minimizes the average cost will not change.
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In 1995, the United States threatened to impose 100 percent tariffs on ________ from ________ if it didn't loosen its protectionist policies
A) light trucks; Germany B) brandies; France C) auto parts; Japan D) luxury cars; Japan
In a period of rapid, unexpected inflation, resources can be lost
A) when firms invest in research and development instead of forecasting inflation. B) when firms use resources to forecast inflation. C) because rapid inflation almost always turns into a hyperinflation. D) Both answers B and C are correct.