21 In the short run if price is less than average cost a firm A is earning

# 21 in the short run if price is less than average

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21. In the short run, if price is less than average cost, a firm: A) is earning normal profits. B) will certainly shut down. C) might shut down, but might stay open. D) is earning positive profits. 22. Which of the following statements is TRUE? I. Taxes may reduce consumption by exactly the same amount as government regulations. II. Taxes typically cost more than government regulations because taxes raise prices whereas regulations simply limit quantity. III. Command and control policies effectively reduce consumption, but they may not be the lowest cost method for doing so. 23. Suppose that a monopolist can sell five units of output at a price of \$5 or six units of output at a price of \$4. What is the marginal revenue of the sixth unit? 24. Which of the following statements is TRUE? I. A \$0.50 tax on each fishing lure sold always raises the price per lure by \$0.50. II. A tax on sellers is equivalent to a tax on buyers. III. A tax on buyers is analyzed by shifting the demand curve up by the amount of the tax.
9 Use the following to answer question 25: Figure: Marginal Costs 1 25. (Figure: Marginal Costs 1) This figure shows the production costs of two firms that produce steel beams. If these two firms represent total production in the industry, how should they allocate the production of 300 beams to minimize costs? A) Firm 1 should produce all 300 beams. B) Firm 1 should produce 100 beams, and Firm 2 should produce 200 beams. C) Firm 2 should produce all 300 beams. D) Firm 1 should produce 150 beams, and Firm 2 should produce 150 beams. 26. Table: Semiconductors Quantity Demanded of Quantity Supplied of Price (per unit in dollars) Semiconductors (Domestic) Semiconductors (Domestic\$3.00500 7002.50580 6502.00600 6001.50700 5501.00850 500Suppose the economy described in the table is currently open to international trade at the world price of \$1.00. Setting a tariff of \$0.50 would generate _____ in revenue from ______. A) \$75; 150 units exported. B) \$75; 150 units imported. C) \$350; 700 units exported. D) \$350; 700 units imported.
10 Use the following to answer question 27: Figure: Maximizing Profit 27. (Figure: Maximizing Profit) What is the firm's profit-maximizing level of output? 28. The iconic blue-and-white Chinese porcelain sold to people all over the world (particularly between the fourteenth and the sixteenth centuries) was so successful, entrepreneurs in Persia, Netherlands, Syria, Iberia, Mexico, and many other areas attempted to copy it. The actual process for creating such high-quality ceramics was kept secret, but in 1708 a German alchemist finally found a way to replicate the ancient art. What do you expect happened to the price of porcelain after 1708, and why?