Which of the following costs can be positive when output is zero?
A) average variable cost
B) total variable cost
C) marginal cost
D) total fixed cost
E) None of the above because when output is zero there are no costs.
D
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It is a conventional practice among apparel retailers to set the retail price of clothing at twice the cost paid to the manufacturer. For example, if the retailer pays $7 for a pair of jeans, the jeans will retail for $14. What must the price elasticity of demand be for this practice to be profit maximizing?
What will be an ideal response?
Suppose there are 11 buyers and 11 sellers, each willing to buy or sell one unit of a good, with values {$14, $13, $12, $11, $10, $9, $8, $7, $6, $5, $4,}. Assume no transaction costs and a competitive market. At the optimal bid, ask spread, what is the total profit that the market maker makes?
a. $8 b. $12 c. $18 d. $20