According to theory, where is the right price determined?
A) where average cost equals marginal cost.
B) where marginal revenue equals marginal cost.
C) where total revenue equals total cost.
D) where there is a markup of 300 percent.
B
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Consider an economy in long-run equilibrium with an inflation rate (?) of 0.08 per year and a natural unemployment rate of 0.05
. Suppose Okun's law holds and a one percentage point increase in the unemployment rate reduces real output by 2% of full-employment output. The expectations-augmented Phillips curve is given by ? = ?e - 2.5 (u - 0.05). Consider a two-year disinflation. In the first year, ? = 0.06 and ?e = 0.08. In the second year, ? = 0.04 and ?e = 0.05. (a) In the first year, what is the value of the unemployment rate? (b) In the first year, by what percentage does output fall short of full-employment output? (c) In the second year, what is the value of the unemployment rate? (d) In the second year, by what percentage does output fall short of full-employment output? (e) What is the sacrifice ratio for this disinflation?
Using the UIP equation, what would happen to the spot rate for euros if the interest rate on U.S. dollar deposits rises ceteris paribus?
a. The spot rate to purchase euros would rise (dollar depreciation). b. The spot rate to purchase euros would fall (dollar appreciation). c. The spot rate to purchase euros would be unchanged. d. The U.S. Federal Reserve would have to raise U.S. short-term interest rates.
According to the simple Keynesian model, if disposable income rises,
a) the marginal propensity to consume rises b) savings falls c) consumption increases d) the expenditure multiplier rises e) all of the above
Which of the following is an example of an organization using marginal analysis?
A. A hotel manager calculating the average cost per guest for the past year. B. A farmer hoping for rain. C. A government official considering what effect an increase in military goods production will have on the production of consumer goods. D. A business calculating economic profits.