Draw a demand and supply curve for a competitive product, making sure to clearly label the axis. Give a brief explanation for why the resulting equilibrium is economically efficient
What will be an ideal response?
The level of output that maximizes the value of output to the economy is Q*. If Q is less than Q*, the value of the output to consumers is greater than the opportunity cost to suppliers, implying that suppliers could supply more units where that consumers value above their opportunity cost. If Q is greater than Q*, the opportunity cost of the suppliers is greater than demanders are willing to pay, implying an inefficient use of resources. Thus, the output level where the opportunity cost of suppliers is equal to the price that demanders are willing to pay is the economically efficient level since this implies that no resources are being used inefficiently.
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Frannie spends her income on rice and beans. At her optimum, Frannie's
a. utility from consuming rice is equal to her utility from consuming beams. b. marginal utility of rice is equal to her marginal utility of beans. c. marginal utility per dollar spent on rice equals her marginal utility per dollar spent on beans. d. marginal rate of substitution is equal to 1.
In the 1930s, John Maynard Keynes said that our main economic problem was
A. weak aggregate demand. B. too much government spending. C. big budget deficits. D. high interest rates. E. that taxes were too low.
According to the Taylor rule, if inflation rises by 1 percent above its target of 2 percent, the Fed should:
A. Lower the real Federal funds rate by 0.5 percent B. Raise the real Federal funds rate by 0.5 percent C. Lower the money supply by 5 percent D. Raise the money supply by 5 percent
Refer to the given data. If Alpha was producing at alternative B and Omega was at alternative C before trade, the gain from specialization and trade would be:
A. 30 tons of wheat.
B. 5 tons of steel.
C. 5 tons of steel and 15 tons of wheat.
D. 15 tons of steel and 5 tons of wheat.