Exhibit 10-7 -In the Long Run, the Firm in Exhibit 10-7 Can

question 145

Multiple Choice

Exhibit 10-7
-In the long run, the firm in Exhibit 10-7 can expect

• A) to earn an economic profit of $760
• B) earn an economic profit of $950
• C) earn zero economic profit
• D) earn an economic profit of $990
• E) suffer a loss of $1,000

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Definitions:

Piece-rate Garment Worker

A laborer who is paid based on the number of items produced, commonly used in the garment manufacturing industry.

Moral Hazard

The risk that one party to a transaction has not entered into the contract in good faith, or has an incentive to take unusual risks in a bid to earn a profit before the contract settles.

All-you-can-eat Buffets

Dining establishments that offer customers the opportunity to consume as much food as they desire for a single fixed price.

Heavier Cars

Refers to automobiles with greater mass, which may have implications for fuel efficiency, safety, and dynamics.