If a perfectly competitive firm finds that price is less than average variable cost, it should:
A. increase output until price equals marginal cost.
B. decrease output until price equals marginal cost.
C. shut down immediately.
D. not adjust output if marginal cost equals price.
Answer: C
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Assume the interest rate on a current one-year bond is 3%, and the expected interest rate on the one-year bond one year from now is 6%. If the term premium on a two-year bond is 0.5%, then the interest rate on the two-year bond will be
A) 4%. B) 4.5%. C) 5%. D) 6.5%.
The avoidance of a worst case scenario strategy in a two-firm balanced oligopoly can best be described as a strategy
a. taken by the more powerful of the two firms, the other follows to avoid a worst case outcome b. taken by the less powerful of the two firms in order to avoid a worst case outcome c. that is best for the firm regardless of the strategy taken by its rival d. that avoids a Nash equilibrium outcome e. that allows both firms to obtain cartel-like profits