Bette's Breakfast, a perfectly competitive eatery, sells its Breakfast Special (the only item on the menu) for 5.00. The costs of waiters, cooks, power, food etc. average out to 3.
95 per meal; the costs of the lease, insurance and other such expenses average out to 1.25 per meal. Bette should A) close her doors immediately.
B) continue producing in the short and long run.
C) continue producing in the short run, but plan to go out of business in the long run.
D) raise her prices above the perfectly competitive level.
E) lower her output.
Question 2
Which of the following statements does not explain why US health care expenditures are higher than in other countries?
A) Government policies have shifted the health care production function downward over time.
B) Consumer incomes have increased, which allows consumers to purchase more health care.
C) The US health care system is relatively inefficient compared to other countries.
D) Demand for health care in the US has increased, so health care production occurs at a higher point on the total product curve than in other countries.
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