Comdex Computer Company is producing at a price of $10 with an average total cost of $12and a fixed cost of $300 . The firm is currently producing 100 units
What are the operating profits of this firm? What are the economic profits of this firm?
The firm is making an operating profit of $100 . To calculate this we need the average variable cost. The average fixed cost is $3 ($300/100). Subtracting that from the average total cost of $12 yields an average variable cost of $9 . That yields a per unit operating profit of $1 which results in a total operating profit of $100 ($1 x 100). The economic profit is -$200 [($10 - $12) x 100)] .
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The discount window provides:
A. guaranteed emergency funds for banks in trouble at a higher interest rate than federal funds rate. B. loans to banks at low interest rates, so they can lend more money out to the public. C. guaranteed emergency funds for banks in trouble at a lower interest rate than others. D. loans to banks at low interest rates, only when the economy is doing well.
Laissez-faire advocates believe that the government should
a. nationalize certain industries b. not provide tax incentives to firms for research c. foster an environment that is favorable to research d. actively use price controls when excess profits are earned e. outlaw monopolies which use research to further their power
Which movement between two points represents economic growth?
A. J to K
B. K to L
C. L to M
D. M to N
Reserve requirements are certainly observable by everyone. The Fed could announce these publicly so everyone would know what they are. The problems come in with the features of controllability and the ability to change these quickly. They would have to be announced with enough time for banks to adjust; also, as we saw with the money multiplier, the Fed cannot control the amount of excess reserves the banks hold. If banks really believed the Fed would change the reserve requirements often they may hold considerable excess reserves and then the link between the instrument and the ultimate objective would be seriously weakened.
Indicate whether the statement is true or false. a. True b. False