Austin owns the Fruit Bowl food truck. Which of the following would be short-run
ID: 1126438 • Letter: A
Question
Austin owns the Fruit Bowl food truck. Which of the following would be short-run decisions for Austin?
i) how much fruit to buy
ii) how many workers to hire
iii) installing a new stove in his truck.
A.
i, ii, and iii.
B.
i only.
C.
ii only.
D.
i and ii.
E.
ii and iii only.
Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?
A.
the economically efficient output
B.
the size of the deadweight loss
C.
the price and the marginal social benefit
D.
the price and marginal private benefit
E.
the size of the external benefit and the price
Explanation / Answer
(1) (D)
Fruit and labor are the two short run (variable) inputs while number of stoves represent a fixed input. So deciding on quantity and number of fruit and workers is a short run decision.
(2) (C)
In presence of externality, socially optimal outcome (price and quantity) is established at intersection of marginal cost and marginal social benefit curves.
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