Suppose the price of a product is less than its average variable cost. When the firm's fixed obligations are completely ended, it will now most likely
a. make an economic profit
b. go out of business
c. expand to a bigger operation
d. continue to be shut down
e. break even
B
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Because a monopolist is the sole producer in its market, it can necessarily alter the price of its good
a. by adjusting the quantity it supplies to the market. b. by changing its marginal cost. c. without affecting its average total cost. d. without affecting the quantity sold.
Use the following graph to answer the next question.
Suppose an economy's full employment output is at the level Qf shown on the graph. Further, suppose the economy's current aggregate demand is represented by AD1. If the government swiftly implements a stimulus program that immediately shifts the economy's aggregate demand to AD2, the aggregate demand in the short-to-medium term would be most closely represented by
A. AD0. B. AD1. C. AD2. D. AD3.