Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C
B. D; B
C. A; B
D. B; C
Answer: B
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"If Michigan's electric utilities were allowed to use marginal cost pricing, it would lead to economic profits for these utilities." Is the previous statement correct or incorrect? Explain your answer
What will be an ideal response?
Trade is promoted by
A) having a self-interested population. B) proper incentives. C) the presence of property rights. D) all of these choices.
_____, the lesser will be the effect of an increase in government spending on real GDP
a. The smaller the crowding-out effect b. The smaller the percentage of government spending financed by tax increases c. The larger the government budget surplus d. The more rapidly money is converted into goods e. The steeper the aggregate supply curve
Suppose that a price-taking firm charges $12 for its product and has a cost function given by C(Q) = 2Q + (Q2/60). The corresponding marginal cost is given by MC(Q) = 2 + (Q/30). How much output should the firm produce? What if the firm has $2,000 of avoidable fixed costs?
What will be an ideal response?