Suppose that price is below the minimum average total cost but above the minimum average variable cost. In the short run, a firm that is a price taker would:
A. immediately shut down and get out of the industry.
B. continue to produce a quantity such that marginal revenue equals marginal cost.
C. shut down temporarily, in hopes of restarting in the near future.
D. cut price and expand output in hopes of achieving economies of scale
Answer: B
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When the Federal Open Market Committee buys government securities:
a. the reserve requirement of banks decrease. b. the reserve deposits of banks decrease. c. the excess reserves of banks increase. d. the federal funds rate increases. e. the legal reserves of banks decrease.
Imagine an economy whose autonomous consumption is $100 billion and MPC is constant at 0.90 . Which of the following will shift the economy's consumption curve upward?
a. a tax increase b. higher capacity utilization rates c. higher national income d. lower wealth holdings e. expectations of higher inflation in the future