At a firm’s profit-maximizing level of output, its price is $200 and its short-run average total cost is $225. The firm
A. has a profit of $25 per unit of output.
B. should shut down if its short-run average fixed cost is less than $25.
C. has a loss of $100 per unit of output.
D. should shut down if its short-run average variable cost exceeds $25.
Answer: B
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On Green Island, the demand for pencils is perfectly elastic and the supply of pencils is perfectly inelastic. If a sales tax on pencils is introduced
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