Consider the Following Data: Equilibrium Price = $8

question 163

Multiple Choice

Consider the following data: equilibrium price = $8.50,quantity of output produced = 100 units,average total cost = $10,and average variable cost = $9.What will the firm do and why?

• A) Shut down in the short run, because price is below average variable cost.
• B) Shut down in the short run, because it will be taking a loss of $100.
• C) Continue to produce in the short run, because price is greater than average variable cost.
• D) Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
• E) none of the above

Understand the key factors influencing inflation and unemployment rates.

Identify and describe phases of the business cycle (expansion, peak, recession, trough).

Analyze the impact of unanticipated inflation on creditors and debtors.

Recognize various types of unemployment (frictional, structural, cyclical).

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