Consider two firms competing to sell a homogeneous product by setting price. The inverse demand curve is given by P = 20 ? Q. Firm 1 has MC1(Q1) = 2 and firm 2 has MC2(Q2) = 2.25. Based on this information, we can conclude that the market price will be:
A. $2 and each firm will produce 9 units.
B. $2.25 and each firm will produce 8.875 units.
C. $2 and firm 1 will produce 18 units and firm 2 will produce 0 units.
D. $2.24 and firm 1 will produce 17.76 units and firm 2 will produce 0 units.
Answer: C
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Given the following information, calculate personal consumption expenditures
GDP $5,000 Gross Private Domestic Investment $1,500 Government Consumption Expenditures and Gross Investment $1,000 Net Exports -$500
Borrowing to finance the increases in government expenditures
A) reduces current private investment expenditures. B) increases interest rates. C) reduces growth in the nation's private capital stock. D) all of the above.
In an oligopoly, the price effect is:
A. the increase in price from lowering the quantity sold. B. the decrease in total revenue that occurs because the increase in quantity will push the market price down. C. the increase in total revenue due to the money brought in by the sale of additional units. D. the increase in output that comes from raising the price.
Union shops are subject to potential competition
A. Since striking union members may be ordered back to work by the president. B. From replacement or substitute workers. C. Since most union members do not take strikes seriously. D. Because some union shop workers refuse to join the union.