Refer to Figure 22.5 below. Suppose that the initial budget constraint AB is given by the equation G = 150 - c/5, where G is the units of public good and c is consumption. A closed- ended matching grant up to 100 units of public good is proposed. If the slope of line segment AD is -2, write the equation of the new budget constraint after a closed-ended matching grant.
For quantities of G between 0 and 100, the equation of the line is G = 375 - c/2. Using this
equation at 100 units, c would be 550. In the original equation, 100 units give c to be 250,
which is a difference of 300. Therefore, from the kink at D, the equation is G = 210 - c/5 from
100 to 210.
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Which of the following situations depicts diseconomies of scale?
A) The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units. B) The average total cost of a firm decreases from $50 to $40 when it increases its production from 10 units to 20 units. C) The average total cost of a firm remains at $50 when it increases its production from 10 units to 20 units. D) The average total cost of a firm remains at $50 when it decreases its production from 20 units to 10 units.
A review of the performance of the economy during the Bush administration is the concern of:
a. macroeconomics. b. microeconomics. c. both macroeconomics and microeconomics. d. neither macroeconomics nor microeconomics.
By owning common stock in a corporation, one has the right to
a. a position on the board of directors b. a job with the company c. help manage the company d. vote at shareholder meetings e. a guaranteed profit
Initially, the economy is in long-run equilibrium. Aggregate demand then shifts leftward by $50 billion. The government wants to increase its spending in order to avoid a recession. If the crowding-out effect is always one-third as strong as the
multiplier effect, and if the MPC equals 0.6, then by how much do government purchases have to increase in order to offset the $50 billion leftward shift? a. by $90 billion b. by $60 billion c. by $20 billion d. by $30 billion