The inverse demand in a Cournot duopoly is P = a ? b(Q1 + Q2), and costs are C1(Q1) = c1Q1 and C2(Q2) = c2Q2. The government has imposed a per-unit tax of $t on each unit sold by each firm. The equilibrium output of each firm is the same as a situation where each firm's:
A. demand increases by t.
B. marginal cost decreases by t.
C. demand decreases by t.
D. marginal cost increases by t.
Answer: D
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The AD curve is the relationship between
A) aggregate planned expenditure and the price level. B) aggregate planned expenditure and real GDP when the price level is fixed. C) the quantity of real GDP demanded and the unemployment rate. D) aggregate planned expenditure and the quantity of real GDP demanded. E) the quantity of real GDP demanded and the quantity of real GDP supplied. The above figure shows a nation's consumption function.
Structuralists believe the main cause of inflation is
a. rigidities in the economy's supply capabilities b. lack of sufficient aggregate demand c. weak position of labor unions d. government intervention in financial markets e. all of the above
Suppose that during the last five years the rate of inflation was 3 percent each year and the money supply had grown 6 percent annually during the period. However, during the last nine months, the Fed has expanded bank reserves more rapidly and the money supply has been growing at a 12 percent annual rate. As a result, the expected inflation rate for the next period will be
a. higher than 3 percent under the rational expectations hypothesis. b. 3 percent under the adaptive expectations hypothesis. c. higher than 3 percent under both the adaptive and rational expectations hypotheses. d. both a and b.
Which of the following is the best analogy? Inflation is like:
A. a mile having more feet. B. a day having more hours. C. a minute having fewer seconds. D. a pound having more ounces.