Average cost
a. is always larger than marginal cost.
b. declines for some range of output, hits a minimum, and then increases.
c. is always smaller than marginal cost.
d. is total cost/price of the product.
b
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Why might a firm remain in operation even if it is earning zero economic profit?
What will be an ideal response?
Suppose a wallet firm has been dumping its wastes into the local river. The government finds out and insists that the firm pay for the cost of the river cleanup. As a result, we can expect:
a. more wallets to be produced at a lower price. b. more wallets to be produced at a higher price. c. fewer wallets to be produced at a lower price. d. fewer wallets to be produced at a higher price. e. the same number of wallets to be produced at a higher price.