A deadweight loss arises under perfect competition
a. True
b. False
Indicate whether the statement is true or false
False
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The Taylor rule implies that the Fed should set the federal funds target based on which of the following?
A) the proportionate gap between actual real GDP and a measure of potential real GDP B) the current deviation of the actual inflation rate from the Fed's inflation objective C) an estimated long-run real interest rate D) all of the above
Which aggregate expenditure categories are influenced by the level of real GDP?
A) investment and government expenditures on goods and services B) consumption and government expenditures on goods and services C) consumption and investment D) imports and exports E) consumption and imports
Which event is most likely to increase the elasticity of demand for a good?
A) A decrease in the demand for the good B) A decrease in the price of the good C) An increase in the demand for the good D) Higher incomes for consumers of the good E) The appearance on the market of excellent substitutes for the good
Consider the salary of Mary Sue Nelson, a sales agent for Plain Truth Advertising. She has an effort cost of C = e2 and a reservation wage of $1,500 so that her compensation package is W = 1,500 + 0.2 Q, where the CEO sets the incentive at 0.2 and Q = 200 e. Here effort is known only by the employee. There is a random shock to output each period whose mean is zero. (a) What is the optimal effort for Mary Sue Nelson? (b) On average, what total wage or salary will she earn each month? (c) On average, what is the output of sales contracts that she makes? (d) On average, what kind of profit will the CEO earn off of Nelson's work?
What will be an ideal response?