Suppose that at the current level of output, price = $12, MC = $14, AVC = $7, and ATC = $9. Which of the following is TRUE?
A) The firm should decrease output.
B) The firm should shut down.
C) The firm should increase output.
D) The firm should maintain the current level of output.
Answer: A
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Suppose a plaintiff hires a lawyer to represent her in a court case. The lawyer will be paid by the hour. Under this contract,
A) production efficiency is not achieved. B) the client bears all of the risk. C) the lawyer has an incentive to lie about his hours worked. D) All of the above.
How does government provision of public goods solve the free rider problem?
A) Governments can impose compulsory taxes to pay for public goods. B) Governments can convert nonrival goods to rival goods by assigning property rights. C) Governments can tax public goods to prevent over-use of the resources. D) Governments cannot solve the free rider problem