If a perfectly competitive firm is producing at a quantity at which MC < AVC, it cannot be ...

If a perfectly competitive firm is producing at a quantity at which MC < AVC, it cannot be maximizing profit in the short run.
 a. True
  b. False

QUESTION 2

You are hired as a production analyst at Monopoly-R-Us and you estimate that, at current output, demand is inelastic and marginal cost is positive. You advise your superiors that they can increase profit by
 a. raising price until demand becomes unit elastic
  b. raising price into the elastic range
  c. lowering price until demand becomes unit elastic
  d. lowering price into the elastic range
  e. reduce output without changing price

QUESTION 3

Producers play a disproportionately large role in influencing public regulation because they have a strong interest in matters that affect their specialized source of income.
 a. True
  b. False

QUESTION 4

A perfectly competitive firm that should not shut down in the short run will maximize profit where
 a. VC = 0
  b. FC = 0
  c. AFC = MC
  d. P = MC
  e. ATC = 0

QUESTION 5

Gilligan runs the only dry-cleaning business on a desert isle. If the cost of cleaning fluid falls, he can increase profit by
 a. raising price
  b. charging the highest price he can
  c. using less cleaning fluid
  d. lowering price
  e. charging a price equal to marginal cost

QUESTION 6

Which of the following is likely to result from the regulation of taxicabs in Mexico City?
 a. The price of taxi rides will decrease.
  b. The price of taxi rides will increase.
  c. The income of taxi owners will increase.
  d. Taxi owners will have greater monopoly power.
  e. The supply of taxis will decrease.