Explain how menu costs affect the slope of the short-run aggregate supply curve
What will be an ideal response?
Menu costs make some prices sticky. As the price level rises, some firms will be reluctant to raise their prices. Sales at those firms will increase, and their output will increase. This creates the possibility that an increase in the price level will increase output. More menu costs can make the short-run aggregate supply curve flatter.
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One factor limiting the Federal Reserve's ability to use monetary policy to stimulate the economy is that the Federal Reserve has
A. tools to lower interest rates, but they do not work at interest rates below 0%. B. tools to lower interest rates, but they do not work at interest rates below 10%. C. no tools at its disposal to lower interest rates. D. tools to lower interest rates, but they do not work at interest rates above 10%.
Opportunity cost can best be defined as the
A. money cost of a good or service. B. money cost plus interest on money borrowed to buy a good or service. C. cost of the resources used to produce a good or service. D. value of the best alternative forgone when the alternative at hand is chosen.
The profit maximizing or loss minimizing quantity of output for any firm to produce exists at that output level in which:
A. total revenue is maximized. B. total cost is minimized. C. marginal cost is minimized. D. marginal revenue equals marginal cost.
Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $60.00. What is the monopoly's profit?
A. $1500 B. -$1000 C. $5000 D. $4500