Why does price equal marginal revenue for the purely competitive firm? What is the relationship to the demand curve for the firm?
What will be an ideal response?
The purely competitive firm is a “price-taker” in the market. The price it receives for its output is constant and does not vary across its range of output. Marginal revenue is defined as the change in total revenue from selling one more unit of output. One more unit of output will be sold at a constant, market-determined price. Thus, price will be equal to the marginal revenue for the firm. Also, the firm’s demand curve will be perfectly elastic because no matter how much or how little the firm produces it will receive the same price per unit of output. Thus, demand equals price and marginal revenue.
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When the interest rate falls in the money market, the quantity of money demanded ________ and the quantity of money supplied ________
A) increases; decreases B) decreases; increases C) stays the same; decreases D) increases; stays the same
Employing a general equilibrium approach, describe the effect of a new law that prohibits steel imports
What will be an ideal response?
Economic growth policies always involve
a. trade-offs b. lower taxes c. higher government spending d. more investment e. more transfer payments
Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000 . She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. Emily's total opportunity cost of capital is
a. $2,000. b. $4,000. c. $12,000. d. $14,000.