Suits Only, a dry cleaning firm that specializes in cleaning business suits, operates in a perfectly competitive market. Robin Smith, an exceptionally talented manager, has been hired to manage Suits Only. In the dry cleaning business, a manager typically makes a salary of $400 per week. Suits Only faces the long-run average and marginal costs shown in the figure below. In long-run competitive equilibrium, the market price for cleaning a business suit is $4.50.
Given the above, the typical dry-cleaning firm has a minimum long-run average cost of cleaning a business suit equal to ________ and the typical dry cleaning firm earns economic profit equal to
________.
A. $2, $2.50 per suit cleaned
B. $3, $1.50 per suit cleaned
C. $4.50, $0
D. $2, $0
Answer: C
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When the price level falls,
A) there is a movement upward along the AS curve. B) both the potential GDP line and the AS curve shift leftward. C) the AS curve shifts leftward but the potential GDP line does not shift. D) the AS curve shifts rightward but the potential GDP line does not shift. E) there is a movement downward along the AS curve.
Which of the following CORRECTLY defines utilitarianism?
A) Cost will increase if production increases. B) The difference between what a consumer is willing to pay and what actually has to be paid. C) Society should strive to achieve the greatest good for the greatest number. D) Equality will not result in efficient outcomes.