Two identical firms compete as a Cournot duopoly. The inverse market demand they face is P = 80 ? 4Q. The cost function for each firm is C(Q) = 8Q. The price charged in this market will be:
A. $32.
B. $12.
C. $56.
D. $48.
Answer: A
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
In a move up the IS curve,
A) investment rises. B) output falls. C) the real interest rate falls. D) saving rises.
In economics, we assume rational decisions are made when individuals weigh:
A. the sunk costs versus the benefits of an action. B. the sunk costs versus the opportunity costs of an action. C. the opportunity costs versus the benefits of an action. D. the opportunity and sunk costs versus the benefits of an action.
A custom paper company finds that when the price of paper is $5, its total revenues are $60,000 . Its total costs are $70,000 . of which $57,000 are variable costs. From this we can infer
a. the firm sells 14,000 units of paper b. economic profit is $10,000 c. the firm should shut down in the short run d. total fixed costs are $3,000 e. price is greater than average variable cost