When fixed costs are ignored because they are irrelevant to a business's production decision, they are called
A. explicit costs.
B. implicit costs.
C. sunk costs.
D. opportunity costs.
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You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater and go home and watch TV or read a book. You place an $8 value on watching TV and a $12 value on reading a book.
A. You should stay and watch the remainder of the show.
B. You should go home and watch TV.
C. You should go home and read a book.
D. You should go home and either watch TV or read a book.
When new firms enter a perfectly competitive market,
A. economic profits of existing firms will continue to be zero.
B. entering firms will earn zero economic profit upon entry into the market.
C. existing firms may see their costs rise if more firms compete for limited resources.
D. prices will rise as existing firms raise prices to keep new firms out of the market.
A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will
A. fall in the short run. All firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
B. fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
C. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.
D. not fall in the short run because firms will exit to maintain the price.
When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is
A. downward sloping.
B. upward sloping.
C. horizontal.
D. vertical.
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