In a perfectly competitive market in which all firms are maximizing their economic profits, the demand and supply curves intersect at a price of $8. From this we know that each
A) firm's average total cost of producing the good is $8.
B) firm's average variable cost of producing the good is $8.
C) firm's marginal cost of producing the good is $8.
D) firm is earning positive economic profits at a price of $8 or more.
Ans: C) firm's marginal cost of producing the good is $8.
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If the Fed decides to reduce bank reserves, it can
A) purchase government bonds. B) extend discount loans to banks. C) sell government bonds. D) print more currency.
Jane has noticed that she used to pay $2 for coffee and now she pays $2.50. Which of the following statements is TRUE?
A) The relative price of coffee has increased compared to tea. B) The money price of coffee has increased. C) The law of supply explains why the price of coffee has increased. D) Jane will stop consuming coffee.