You Are Hired as an Economic Consultant to the Pampered

question 260

Multiple Choice

You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The market price is less than its average variable cost. You should advise the firm to

• A) cease production immediately because it is not covering its variable costs of production.
• B) lower its price so that it can sell more units of output.
• C) produce in the short run to minimize its loss, but exit the industry in the long run.
• D) raise its price until it breaks even.

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Definitions:

Service Mark

A trademark used to identify and distinguish the services (rather than products) of one provider from those of others.

Trade Name

The name under which a business operates and is known to the public, different from its legal name.

Weather Announcer

A person or system that communicates weather forecasts and conditions to the public.

Patent Law

The area of law that deals with the protection of inventions, granting inventors exclusive rights to use, make, and sell their inventions for a certain period.