Author Question: Economic theory defines capital as A) anything that is scarce. B) non-human resources. C) ... (Read 147 times)

acc299 · **on:** Jun 29, 2018

Economic theory defines capital as

A) anything that is scarce.
B) non-human resources.
C) produced resources used to produce future goods.
D) resources containing a positive opportunity cost.
E) stocks and bonds.

Question 2

Are the terms shutdown and exit synonymous? What is the optimal shutdown rule for a firm?

What will be an ideal response?

courtney_bruh · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

C

Answer to Question 2

No, the terms shutdown and exit are not synonymous. Shutdown refers to a short-run decision to not produce anything during a specific period of time. When a firm shuts down, it still incurs its fixed costs. On the other hand, exit refers to a long-run decision by a firm to leave the market. The optimal shutdown rule for a firm suggests that a firm should shut down if the price of the good it produces falls below its average variable cost. In situations, where the price is less than the average variable cost, for every unit of a good that the firm sells, it is paying its variable inputs more than what it is receiving from the sale of the good. As a result, the firm would lose more than the fixed cost that it would lose by shutting downit would also lose a portion of the variable cost.