21) Suppose that ramen noodles are an inferior good. When income decreases, the

Question

21) Suppose that ramen noodles are an inferior good. When income decreases, the equilibrium quantity of ramen noodles
will ________ and the equilibrium price of ramen noodles will ________. 21) ______
A) increase; increase B) increase; decrease
C) decrease; increase D) decrease; decrease

WHY?

22) If the price of a fixed factor of production increases, then: 22) ______
A) marginal costs will increase. B) variable costs will increase.
C) variable costs are unchanged. D) total costs are unchanged.

WHY?

23) A firm suffering economic losses decides whether or not to produce in the short run on the basis of: 23) ______
A) whether revenues cover variable costs.
B) whether revenues from operating are sufficient to cover fixed plus variable costs.
C) whether future profits will allow it to recover fixed costs.
D) whether revenues from operating are sufficient to cover fixed costs.

WHY?

Explanation / Answer

21)B) increase; decrease

22)A) marginal costs will increase

23)D) whether revenues from operating are sufficient to cover fixed costs.

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