You are an analyst with a perfectly competitive firm that makes DRAM memory chips. You must manufacture the chips before you know what the demand will be. Based on the above figure, suppose you think demand will be high and manufacture the profit-maximizing quantity of chips. Demand, however, turns out to be low. Because you thought demand would be high, your profit will be ________ than if you
knew demand was going to be low.
A) $200 million more
B) $400 million less
C) $800 million less
D) $200 million less
B) $400 million less
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Monetarists argue that the crowding-out-effect is rather large. True or False
The difference between inventories and inventory investment is that typically ________
A) the first one is a stock of unfinished or unsold goods; the second one is a flow that indicates productive activity B) the first one denotes the change in holdings of capital; the second one includes most final goods C) the first one is measured at the beginning of the year; the second one is measured at the end of the year D) all of the above E) none of the above
Deadweight loss:
A. creates efficiency in markets. B. is the difference between the total surplus occurring in a market and the maximum total surplus achievable. C. is the loss in producer surplus from a price increase D. always occurs in markets.
Demand is unit elastic whenever
a. price elasticity has an absolute value of 1 b. price elasticity has an absolute value greater than 1 c. price elasticity has an absolute value less than 1 d. price elasticity is negative e. consumers always respond to a one-dollar change in price by decreasing their quantity demanded by one unit