"By producing at an output rate at which marginal revenue equals marginal cost, a firm is definitely making positive economic profits." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. When it produces at an output rate at which marginal revenue equals marginal cost, the firm is doing its best (providing price exceeds its average variable cost). However, the firm does not necessarily make a profit. Depending on the market conditions that affect the market price and its average variable cost, it may actually incur a loss but the loss is still the minimum as long as marginal revenue equals marginal cost.
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The table above gives the labor market for a small foreign economy. A minimum wage law that sets the minimum wage at $8.50 per hour produces
A) a labor surplus of 65 million hours. B) a labor shortage of 25 million hours. C) a labor surplus of $0.50 per hour. D) a labor surplus of 25 million hours. E) equilibrium in the labor market.
Comparing the aggregate supply curve and the short-run Phillips curve, we see that they
A) both exist because real wage rate is fixed in the short run. B) both exist since money wages are flexible. C) each describe different parts of the economy. D) describe the same phenomena but contradict each other. E) both exist because money wage rate is fixed in the short run.