Author Question: In the short run, when the prevailing market price falls below the average variable cost curve, a ... (Read 22 times)

bobypop · **on:** Jun 30, 2018

In the short run, when the prevailing market price falls below the average variable cost curve, a firm in perfect competition will shut down because:
a. economic profit is zero.
b. price is less than marginal revenue.
c. marginal revenue is insufficient to pay average variable cost.
d. other firms will enter the market seeking profits.

Question 2

The more elastic the supply of a product, the more the actual burden of a tax on the product will:
a. fall on sellers.
b. fall on buyers.
c. fall equally on both buyers and sellers.
d. create a smaller deadweight loss (or excess burden).