If a firm shuts down in the short run, it will:
a. incur losses equal to its fixed costs.
b. produce at the output level where MC = MR.
c. reduce its losses to zero.
d. do this because P > AVC.
e. have total revenue greater than total fixed costs.
a
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In 2010, a British Petroleum oil rig exploded in the Gulf of Mexico. The explosion resulted in a major oil spill and a decrease in the supply of oil. At the same time, the average price of gasoline decreased. Which of the following best explains the
decrease in the price of gasoline? A) The quantity demanded of gasoline increased. B) The demand for gasoline decreased, and the effect of the decrease in demand on the gasoline price was greater than the price effect of the decrease in supply. C) The demand for gasoline increased, and the effect of the increase in demand on the gasoline price was less than the price effect of the decrease in supply. D) The demand for gasoline remained unchanged.
When demand is elastic,
A. the percentage change in price is greater than the percentage change in quantity demanded. B. price increases raise total revenue. C. the buyer is sensitive to changes in price. D. the elasticity coefficient is greater than zero, but less than one.