Suppose two duopolists operate at zero marginal cost. The market demand is p = a - bQ. If firm 1 is the Stackelberg leader, what level of output will it choose?
A) q1 = (a - bq2 )/2b
B) q1 = (a - 2bq2 )/2b
C) q1 = a/b
D) q1 = a/2b
D
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If the federal funds rate is set by the Taylor rule and the output gap increases by 5 percentage points, everything else remaining unchanged, the federal funds rate should ________
A) decrease by 2.5 percentage points B) decrease by 5 percentage points C) increase by 5 percentage point D) increase by 2.5 percentage points
A good for which demand decreases when income increases is known as a(n) ________ good
A) normal B) inferior C) substitute D) complementary
Compared to a perfectly competitive industry, a monopolist with the same marginal cost and demand curve will charge:
a. a higher price and produce a higher volume of output.
b. a lower price and produce a higher volume of output.
c. a lower price and produce a lower volume of output.
d. a higher price and produce a lower volume of output.
e. the same price and produce the same volume of output.
Refer to the above figure. If the farmer has 50 acres of land, the farmer is producing at point a, and an acre of land yields 400 bushels of beans or 800 bushels of wheat, how much land is devoted to the production of wheat?
A. 10 acres B. 15 acres C. 12.5 acres D. 8.5 acres