The owner of Tie-Dyed T-shirts, a perfectly competitive firm, has hired you to give him some economic advice. He has told you that the market price for his shirts is $20 and that he is currently producing 200 shirts at an AVC of $15 and an ATC of $25. You tell him he should continue to operate in the short run because
A. he has to pay his fixed costs of $2,000 if he shuts down, which is greater than his loss when he operates.
B. he is earning positive economic profits of $4,000.
C. his loss from operating is only $2,000, which is less than his loss if he shuts down.
D. In fact you do not tell him to operate-he should shut down since he has a loss.
Answer: A
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The government could increase Social Security tax revenues by raising the payroll tax cap beyond its current $110,000
Indicate whether the statement is true or false
Figure 4-7
Refer to . Which of the following is true for the tax illustrated?
a.
The tax increases the price of gasoline by $.60.
b.
Since the demand for gasoline is more inelastic than the supply, consumers bear most of the burden of the tax.
c.
Since the demand for gasoline is more elastic than the supply, consumers bear most of the burden of the tax.
d.
Since the supply of gasoline is highly inelastic, the primary burden of the tax is imposed on the suppliers of gasoline.