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Unformatted text preview: idebooks e. shut down 17. A competitive firm operating in the short run is maximizing profits and just breaking even. Its costs include a monthly license fee of $100 that is imposed by the state and must be paid for as long as the firm is in existence. The license fee is now raised to $150. To continue to maximize profits in the short run, the firm should: a. increase price. b. increase output. c. reduce output. d. not change output. 5 ECON 102 NAME: _______________________ FALL 2012 EXAM- 3 VERSION A 18. Zoe's Bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase. The demand for Zoe's pastries does not change, nor does the firm shut down. Hence, Zoe's Bakery will ________ its price and ________ its level of production. a. raise; increase b. decrease; increase c. raise; decrease d. not change; decrease 19. The market for beef is in long- run equilibrium at a price of $3.25 per pound. The announcement that mad cow disease has been discovered in the United States reduces the demand for beef sharply, and the price falls to $2.00/pound. If the long- run supply curve is horizontal, then when long- run equilibrium is reestablished the price will be: a. $3.25 per pound. b. $2 per pound. c. g...
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