A decrease in firm 2's marginal cost will cause:
A. a downward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity.
B. a downward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.
C. an upward shift in firm 2's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a lower quantity and firm 2 is producing a higher quantity.
D. an upward shift in firm 1's reaction function, resulting in a new Cournot equilibrium where firm 1 is producing a higher quantity and firm 2 is producing a lower quantity.
Answer: C
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Suppose that the price of a TV is $200 and he price of an MP3 player is $50. What is the opportunity cost of a TV (in terms of MP3 players), and what is the opportunity cost of an MP3 player (in terms of TVs)?
What will be an ideal response?
The long run refers to a time period
A) long enough for a firm to pay all of its creditors in full. B) long enough for a firm to change the use of its variable inputs. C) long enough for a firm to vary all of its inputs, to adopt new technology, and change the size of its physical plant. D) during which a firm is able to purchase all of its inputs, including its plant and equipment.
The firm will shut down in the short run if
A) the price falls below its minimum AVC. B) the market price rises unexpectedly. C) P = MC. D) P = ATC at its minimum.
An economy has no international trade and no income taxes. If lump-sum taxes increase by $40 billion and the marginal propensity to consume was equal to 0.7, then in the short run while prices are constant, real GDP
A) decreases by $93 billion. B) increases by $28 billion. C) increases by $12 billion. D) decreases by $28 billion.