Define aggregate supply. Describe the characteristics of the aggregate supply curve in the immediate short-run, short-run and long-run perspectives.
What will be an ideal response?
The aggregate supply curve is one that shows the total quantity of goods and services that will be produced (supplied) at different price levels. In the immediate short run, the aggregate supply curve is horizontal because nominal wages, input prices and output prices are fixed and firms collectively supply exactly the level of output demanded at any given price level. In the short run, the aggregate supply curve is up sloping because nominal wages and input prices adjust only slowly to changes in the price level. With this curve, an increase in the price level increases real output and a decrease in the price level reduces real output. In the long run, the aggregate supply curve is vertical at the full-employment level of output for the economy because the rise in wages and other inputs will match changes in the price level.
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Gross investment equals
A) net investment - depreciation + change in inventories. B) net investment + depreciation. C) net investment + change in inventories. D) depreciation + change in inventories.
"Price discriminators lose money by being nice to their customers." Is the previous statement correct or incorrect?
What will be an ideal response?
The table below shows the demand and cost data facing "Velvet Touches," a monopolistically competitive producer of velvet throw pillows
Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost 1 $30 $32 2 28 43 3 26 53 4 24 64 5 22 76 6 20 90 7 18 106 8 16 126 Use the data to answer the following questions. a. Complete the Total Revenue (TR), Marginal Revenue (MR), and Marginal Cost (MC) columns above. b. What are the profit-maximizing price and quantity for Velvet Touches? c. Is the firm making a profit or a loss? How much is the profit or loss? Show your work. d. Is this firm operating in the long run or in the short run? Explain your answer. e. If the firm's profit or loss is typical of all firms in the market for throw pillows, what is likely to happen in the future? Will there be more firms or will some existing firms leave the industry? Explain your answer. f. What will happen to the typical firm's profit or loss after all entry/exit adjustments?
Sadie works at a factory for $15 an hour and typically works 40 hours a week. Sadie gets a pay raise and now earns $20 an hour. She decides to work 45 hours a week at $20 an hour. Her response to the pay increase demonstrates the:
A. income effect outweighing the price effect. B. price effect outweighing the income effect. C. income effect outweighing the substitution effect. D. labor effect outweighing the price effect.