Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the supply of labor, a major new discovery of oil, and new environmental regulations that raise the cost of electricity production. In the short run
a. the price level will rise and real GDP will fall.
b. the price level will fall and real GDP will rise.
c. the price level and real GDP will both stay the same.
d. All of the above are possible.
d
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A black market
A) is legal only when it is associated with government price ceilings. B) is defined as the deadweight loss associated with taxes. C) benefits no one. D) is a potential outcome of a price ceiling. E) is always legal.
Refer to the game in Scenario 13.6. What will occur if ERS Co plays a maximin strategy?
A) -$100, -$1 B) $2, -$0.5 C) $1, -$1 D) -$0.5, -$0.5 E) There is a 0.25 chance of each outcome in that case.
Jessica owns a company that makes pre-packaged sandwiches for convenience stores. The market price for a sandwich is $5 and Jessica is a price-taker. Her daily variable cost for making sandwiches is C(Q) = 2.5Q + (Q2/40) and her marginal cost is MC = 2.5 + (Q/20). She is currently producing sandwiches according to the quantity rule. What should Jessica do if she has an avoidable fixed cost of $50 a day?
A. She should keep producing sandwiches because the price is greater than the minimum of average fixed cost. B. She should keep producing sandwiches because she is maximizing profit at the current quantity. C. She should shut down production because the price is greater than the minimum of average cost. D. She should shut down production because the fixed cost can be avoided if she does.
Sebastian decides to open a tree farm. When deciding to open his own business, he turned down two separate job offers of $25,000 and $30,000 and withdrew $20,000 from his savings. Sebastian's savings account paid 3 percent interest. He also borrowed $20,000 from his brother, whom he pays 2 percent interest per year. He spent $15,000 to purchase supplies and earned $50,000 in revenue during his
first year. Which of the following statements is correct? a. Sebastian's economic profit is $4,000 . and his accounting profit is $34,600 . b. Sebastian's economic profit is $4,600, and his accounting profit is $35,000. c. Sebastian's economic profit is -$16,000 . and his accounting profit is $34,600. d. Sebastian's economic profit is -$16,000 . and his accounting profit is $14,600.