QUESTION 48 Figure 7-4 shows the relationship between the various costs of a per

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QUESTION 48 Figure 7-4 shows the relationship between the various costs of a perfectly competitive firm. In the figure, when the market price equals $105 and the firm sells 675 units of output, the firm: Figure 7-4 $105- Averoge Coat $88 $55 - Cos 460 1675 q 600 O a. should sell more units of its output to earn higher prices. O b, is earning a normal profit. O c. is caming positive economie profit. dis experiencing a loss, but should continue operating temporarily because e, is experiencing a loss and should shut down. QUESTION 49 According to Harvard economists Richard Freeman and James Medoff, the cffect of unions is to: O a decrease output in the union sector and have no impact on output in the nonunion sector o b. increase output in the union sector and decrease output in the nonunion sector e c. decrease output in the union sector and increase output in the nonunion sector e d. decrease output in the union sector and in the nonunion sector. O e. increase output in the union sector and in the nonunion sector Save All Ans

Explanation / Answer

Ans is C

Since at output of 675 units, price is above ATC which means firm is earning supernormal or economic profit

Economic profit is the profit above normal rate of profit

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