A fashion fad significantly increases the demand for fedora hats. Which of the following would most likely be the result?
a. The price of fedoras would plummet.
b. The production of fedoras would decline.
c. Sellers would discount the price of their existing supply of fedoras.
d. Buyers would compete fiercely to buy a limited quantity of fedoras.
d. Buyers would compete fiercely to buy a limited quantity of fedoras.
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If a firm in a perfectly competitive market faces a market price of $4, and it decides to produce 700 units, the firm's average revenue will be:
A. $175. B. $2,800. C. $4. D. $700.
Pappy's Popcorn Emporium operates in a perfectly competitive industry and hires you as an economic consultant. Pappy's is currently producing at a point where market price equals its marginal cost. Its market price is greater than its average variable cost but less than its average total cost. You advise Pappy's to
A. raise its price until it breaks even. B. lower its price so that it can sell more units of output. C. cease production immediately because it is not covering its operating costs. D. produce in the short run to minimize its loss, but exit the industry in the long run.