The combination of producer and consumer surplus shows the:
a. maximum price that buyers are willing to pay for a good
b. minimum price buyers are willing to pay for a good
c. maximum price that sellers can charge.
d. minimum price below which sellers will not sell.
e. gains from voluntary exchange.
Ans: e. gains from voluntary exchange.
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A star basketball player signs a contract that newspaper reports indicate is worth $10 million. The player receives $2 million upon signing, and $2 million every year for four years. The contract is worth
A) less than $10 million since the present value of $2 million received one or more years from now is less than $2 million. B) more than $10 million since the present value of $2 million received one or more years from now is more than $2 million. C) $10 million as reported in the press. D) some amount around $10 million. To determine whether it is more or less than $10 million we need to know whether the interest the player can earn is more or less than the market rate of interest.
What should happen to the equilibrium interest rate and the corresponding rate of investment if the Fed decreases the discount rate?
A. The equilibrium interest rate and the equilibrium rate of investment should both decrease. B. The equilibrium interest rate and the equilibrium rate of investment should both increase. C. The equilibrium interest rate should decrease, and the equilibrium rate of investment should increase. D. The equilibrium interest rate should increase, and the equilibrium rate of investment should decrease.
An example of an expansionary monetary policy is
A) a decrease in the required reserve ratio. B) the Fed selling bonds in the open market. C) an increase in the required reserve ratio. D) a law placing a ceiling on the maximum interest rate that banks can pay to depositors.
Assume a firm is operating under conditions of pure competition and faces a marginal cost function that is everywhere below its average total cost
If the firm is producing where marginal revenue equals marginal cost will it be possible for it to make an economic profit? Explain.