A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?
a. Yes, because cutting hair is profitable.
b. No, because he may not be able to sell more services.
c. It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.
d. It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.
c
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If revenue in the short run is sufficient to offset variable costs but not all fixed costs, what should the firm do?
What will be an ideal response?
In the above figure, starting at E1, if there is a supply shock that is permanent, the
A) aggregate supply would shift to SRAS1 and LRAS1 would shift to LRAS0. B) aggregate supply would shift to SRAS1 and LRAS0 would shift to LRAS1. C) aggregate supply would shift to SRAS2 and LRAS0 would shift to LRAS1. D) aggregate supply would shift to SRAS1 and then return to SRAS0.