Suppose a Firm Has Unavoidable Fixed Costs of $500,000 Per

question 98

Multiple Choice

Suppose a firm has unavoidable fixed costs of $500,000 per year, and it decides to shut down. What is the firm's producer surplus?

• A) PS is positive in this case, but we cannot determine the value based on the given information.
• B) PS is negative in this case, but we cannot determine the value based on the given information.
• C) PS = -$500,000
• D) PS = 0

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Definitions:

Money Supply

The entire sum of monetary holdings accessible in an economy at a certain period.

Travelers Checks

Preprinted, fixed-amount checks designed to allow the person signing them to make payments or exchange for local currency, used mainly by travelers to protect against theft or loss.

M1 Balance

The most liquid components of the money supply, including physical currency, demand deposits, and other assets that can quickly be converted to cash.

Currency

A form of currency widely accepted in a specific nation or economic setting.