Mrs Smith Operates a Business in a Competitive Market

question 545

Multiple Choice

Mrs. Smith operates a business in a competitive market. The current market price is $7.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

• A)shut down her business in the short run but continue to operate in the long run.
• B)continue to operate in the short run but shut down in the long run.
• C)continue to operate in both the short run and long run.
• D)shut down in both the short run and long run.

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Definitions:

Gini Coefficient

A statistical measure of income or wealth distribution within a nation, indicating inequality.

Quantitative Easing

A monetary policy where a central bank buys securities in the open market to increase the money supply and encourage lending and investment.

Reserve Requirement

A regulation set by central banks that determines the minimum amount of reserves that banks must hold against deposits.

Gross National Income

The total domestic and foreign output claimed by residents of a country, consisting of GDP plus factor incomes earned by foreign residents, minus income earned in the domestic economy by nonresidents.