In the circle model with constant marginal cost, each point on the circle will contain a firm in equilibrium if fixed entry costs are zero.
Answer the following statement true (T) or false (F)
True
Rationale: All market power vanishes when fixed entry costs go away -- causing each firm to supply only to those whose ideal point is precisely the product characteristic produced.
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If government uses a pollution tax to control pollution, the tax should be set
A) equal to the private cost of production created by the activity. B) equal to the external cost of production created by the activity. C) equal to the social cost of production created by the activity. D) at the amount that will eliminate the pollution completely.
Why might a concentration ratio be a poor measure of actual industry competition?
What will be an ideal response?
The following table shows Jay's estimated annual benefits of holding different amounts of money.Average moneyholdings($)Total benefit($)1002020029300664004150044How much money will Jay hold if the nominal interest rate is 6 percent? (Assume he wants his money holdings to be in multiples of $100.)
A. $100 B. $400 C. $300 D. $200
Answer the following statements true (T) or false (F)
1) The greater the MPC, the greater the multiplier. 2) The multiplier is equal to the reciprocal of the MPC. 3) The multiplier shows the relationship between changes in a component of spending, say, investment, and the consequent changes in real income and output. 4) Economists widely agree that the value of the real-world multiplier is 2.5. 5) If the MPC is .9 and investment spending increases by $20 billion, real GDP will increase by $200 billion.