What is the lowest price at which a firm produces an output? Explain why
What will be an ideal response?
The lowest price at which a firm will produce output is the price that equals the firm's minimum AVC. At this price the firm has just enough total revenue to cover its total variable costs. The firm's loss is equal to its fixed costs. At any lower market price the firm's loss would be greater than its fixed costs. In this case the firm can avoid losses that are greater than its fixed cost by shutting down.
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If the demand for videotapes tends to be elastic, then a decrease in videotape prices means that people spend more on videotapes than before
Indicate whether the statement is true or false
When there is an increase in demand,
a. the demand curve shifts toward the origin of the graph. b. the demand curve twists clockwise. c. the demand curve shifts away from the origin of the graph. d. the demand curve twists counterclockwise. e. a lower price has increased the amount of the good that consumers will buy.