Suppose that you own a monopolistically competitive firm. Using the three-step method, calculate whether your company is making economic profits, economic losses, or zero profits. Use hypothetical numbers for your calculations. Do not use examples or numbers from the text.
What will be an ideal response?
Examples will vary, but should show a thorough understanding of how to calculate a firm’s economic status using the three-step method. For example, a firm’s marginal revenue and marginal cost could intersect at a quantity of 200. Therefore, q* equals 200. At q*, the market price (P*) is $10. Thus, the total revenue is $2,000 (200 x $10 = $2,000). Finally, at q*, the average total cost (ATC) is $8. As a result, total cost is $1,600 (200 x $8 = $1,600). The firm is making a profit of $400 because the total revenue of $2,000 exceeds the total cost of $1,600 by $400.
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The unemployment rate measures, at a point in time, the ________
A) percentage of workers who do not have a job B) percentage of workers who do not have a job but are looking for work C) percentage of workers who stop working D) percentage of workers who are looking for work E) none of the above
A trade surplus provides a measure of the gap between exports and imports
a. True b. False Indicate whether the statement is true or false
Exports ________ GDP and imports ________ GDP
A) decrease; decrease B) decrease; increase C) increase; increase D) increase; decrease
The identity that shows that total income and total expenditure are equal is
a. GDP = Y. b. Y = DI + T + NX. c. GDP = GNP - NX. d. Y = C + I + G + NX.