Which of the following functions does the Fed perform?
A. Printing money
B. Holding bank reserves
C. Providing loans to other countries
D. All of the above are functions the Fed performs.
B. Holding bank reserves
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If the government increases the corporate income tax,
A) the user cost of capital declines and V* increases. B) the user cost of capital declines and V* decreases. C) the user cost of capital increases and V* decreases. D) the user cost of capital increases and V* increases.
The automatic budget deficits and budget surpluses that occur in the federal budget over the business cycle
A) destabilize the economy. B) stabilize the economy. C) decrease potential GDP. D) increase potential GDP.
All of the following are true regarding tacit collusion except which one?
A) It is more likely when barriers to entry are high. B) It is illegal. C) It is more likely when the price elasticity of demand is small. D) It harms buyers.
Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. How many active firms are in the market?
A. 50 B. 5 C. 10 D. 20