Question

D Question 8 2 pts If price is lower than average variable cost, the firm is realizing losses but should continue operating in the market. O True False Question9 2 pts If the law of one price (LOOP) is violated, arbitrage opportunities will eventually drive prices in a direction that will restore LOOP True False DQuestion 10 2 pts Revealed preferences can be either hypothetical or incentive compatible. True False

Answer 1

Hi,

As per HOMEWORKLIB RULES, we are required to answer only first question. Please re-post rest of the questions as an individual question. We are bound by the rules. Thanks.

Answer 8: False, If price is lower than Average Variable Cost, then firm is facing losses and should shut down its production. The minimum of AVC is called the shut down prices, if price goes lower than AVC, it is better to shut down the firm because firm is not able to recover its fixed costs (or average fixed costs).