When the demand curve is vertical and the supply curve is upward sloping,:
a. a rise in the input price that increases marginal cost by $1, decreases the firm's profit by $1.
b. a drop in the input price that lowers the marginal cost by $1, doubles the firm's profit.
c. a drop in the input price that lowers the marginal cost by $1, decreases the output price by $1.
d. a rise in the input price that increases the marginal cost by $1, doubles the output price.
C
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Financial innovations may be expected to cause a decline in ________
A) financial frictions B) the credit spread C) the real interest rate on investments D) all of the above E) none of the above
You are an analyst with a perfectly competitive firm that makes DRAM memory chips. You must manufacture the chips before you know what the demand will be. Based on the above figure, suppose you think demand will be high and manufacture the profit-maximizing quantity of chips. Demand, however, turns out to be low. Because you thought demand would be high, your profit will be ________ than if you
knew demand was going to be low.
A) $200 million more
B) $400 million less
C) $800 million less
D) $200 million less
When a Nash equilibrium is reached:
A. the outcome will only change if the "lead" player changes his strategy. B. no one has an incentive to break the equilibrium by changing his strategy. C. it must be true that all players have a dominant strategy. D. None of these statements is true.
An increase in an economy's productive resources
a. implies that the law of increasing costs no longer applies. b. shifts its production possibilities curve inward. c. shifts its production possibilities curve outward. d. has no effect on its production possibilities curve.