A firm sells in a competitive market in which price is $10. Its marginal cost is 2 + 0.5Q. Determine the profit-maximizing level of output.
What will be an ideal response?
The solution requires equating P = MC to determine Q:P = 10 = MC = 2 + 0.5Q10 = 2 + 0.5Q8 = 0.5QQ = 16
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The problem of "free riders" arises in a society when goods
A) can't be provided exclusively to the people who pay for them. B) cease to be scarce. C) produced by government are provided to everyone. D) supplied by the private sector are paid for from tax revenue. E) wanted by everyone are priced too low.
Suppose that IS and LM intersect at full-employment output. A leftward shift of LM will be followed by a __________ price level that shifts LM to the __________ in a return to full employment
A) rising; right B) rising; left C) falling; right D) falling; left
Suppose there is a market that has market demand characterized as X = 30 - P/3. Suppose further that market supply can be written as X = P/2 - 2.
(A) Find the equilibrium price and quantity in this market. (B) If a unit tax of $16 is imposed on good X, what are the equilibrium price, quantity, and tax revenue in the market? (C) Suppose an ad valorem tax of 30 percent is imposed on good X. The after-tax demand equation would be X = 30 - P/2. Now find the equilibrium price, quantity, and tax revenue in the market. (D) What can be said about the amount of tax revenue generated under each taxing scheme, and why?
Changes in taxes and transfers affect planned spending:
A. indirectly, by changing disposable income and, consequently, consumption. B. directly, by changing induced expenditures. C. autonomously. D. only when there is an expansionary gap.