The above diagram shows the cost curves for a perfectly competitive wheat farmer
At what price(s) does the wheat farmer make an economic profit? Make zero economic profit? Incur an economic loss? How many bushels of wheat does the farmer produce if the price is $3 per bushel? If the price is $0.50 per bushel?
At any price that exceeds the minimum of the average total cost the farmer earns an economic profit. So the farmer makes an economic profit if the price is greater than $2 per bushel. The farmer makes zero economic profit if the price equals the minimum total cost. So the farmer makes a normal profit if the price is $2 per bushel. Finally, the farmer incurs an economic loss if the price is less than the minimum average total cost. So the farmer incurs an economic loss if the price is less than $2 per bushel. If the price is $3 per bushel, the farmer produces 30,000 bushels of wheat per year. If the price is $0.50 per bushel, the farmer has shut down because the price is less than the minimum average variable cost and so the farmer produces 0 bushels per year.
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If consumption behavior can be described as C = 50 + .8Y, then the saving function is
A) S = 50 + .2Y. B) S = -50 + .2Y. C) S = -50 + .8Y. D) S = 50 + .8Y.
The government buys new weapons systems. The manufacturers of weapons pay their employees. The employees spend this money on goods and services. The firms from which the employees buy the goods and services pay their employees. This sequence of events illustrates
a. the accelerator effect. b. the multiplier effect. c. the chain effect. d. the bandwagon effect.
Refer to the above table. Suppose both governments offer their respective company a $10 million subsidy
What will be an ideal response?
Which of the following most clearly illustrates the concept of "derived demand"?
a. An increase in the price of steak causes the demand for poultry to increase b. An increase in the demand for new houses leads to an increase in the demand for construction workers. c. An increase in consumer income leads to an increase in the demand for services provided by the government. d. An increase in the demand for new cars causes the demand for used automobiles to rise.