Question 1
Suppose a perfectly competitive firm is producing a level of output such that its average revenue is less than its lowest average variable cost. The firm should
◦ not change its output.
◦ increase the market price.
◦ expand its output.
◦ reduce its output.
◦ produce zero output.
Question 2
Suppose your trucking firm in a perfectly competitive industry is making zero economic profits in the short run. The federal government imposes a new safety regulation that affects all firms, thus shifting the marginal cost curve upward. As a result your firm's profit maximizing, short-run output will
◦ remain the same since the new regulation does not affect
ATC.
◦ increase as firms will leave the industry at the higher costs, thus driving up the market price.
◦ increase as price rises in the long run.
◦ remain the same because you will pass on the extra costs to the consumers.
◦ decrease because the new
MC curve will intersect the horizontal demand curve at a lower rate of output.
Myopia (nearsightedness). In the uncorrected top figure, the image comes into focus in front of the
John Lewis Krimmel’s painting of the Fourth of July in Centre Square Philadelphia (1812) shows the d
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