A firm sells a product in a perfectly competitive market. The marginal cost of the product at the current output level of 500 units is $1.50. The market price of the product is $1.50 and the minimum possible average variable cost is $1. To maximize profits, the firm should
A. decrease production to less than 500 units.
B. continue producing 500 units.
C. shut down.
D. increase production to more than 500 units.
Answer: B
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Household spending on goods and services is known as
A) consumption spending. B) government purchases. C) net exports. D) planned investment spending.
Which of the following is a partially valid economic argument for restricting free trade?
a. Restrictions on foreign trade will increase employment and permanently reduce unemployment. b. Infant industries may need temporary protection to develop and gain productive efficiency. c. A nation needs to protect its national defense; hence, it should restrict some products that threaten an industry considered vital to its defense. d. Both b and c are correct.