The GDP deflator is equal to
A) real GDP divided by nominal GDP.
B) nominal GDP divided by real GDP, multiplied by 100.
C) nominal GDP divided by real GDP.
D) real GDP divided by nominal GDP, multiplied by 100.
Answer: B
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AC is lower in the long run than in the short run because
A. prices often fall, allowing savings on purchases. B. inputs can be combined more efficiently in the long run. C. over time the prices of all inputs tend to decrease. D. AFC falls with output over all ranges of output.
Why are the actions of the firms in an oligopoly interdependent?
Consider a consumer choosing between spending her money on food, F, or clothing, C. Assume that a unit of food and a unit of clothing have the same price, and that the consumer can afford a total of 20 units of either food or clothing. The benefit of food is given by B(F) = 100?F, with MB(F) = 50/?F. The benefit of clothing is given by B(C) = 25C, with MB(C) = 25. How many units of food should the consumer buy?
A. 0 B. 2 C. 4 D. 6
Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product.
Suppose Quick Buck and Pushy Sales decide to collude and work together as a monopolist with each firm producing half the quantity demanded by the market at the monopoly price. If Quick Buck cheats by reducing its price to $1 while Pushy Sales continues to comply with the collusive agreement, then Quick Buck's economic profit will be ________.
A. $4,000 B. $3,000 C. $2,000 D. $6,000