Sweet Husks is a perfectly competitive corn farm. Currently, the expected price of an ear of corn is $0.20 and, at its current production level, Sweet Husks has a marginal cost of $.20 per ear. Which of the following is true regarding Sweet Husks?
A) To maximize expected profit, Sweet Husks should increase production.
B) To maximize expected profit, Sweet Husks should decrease production.
C) To maximize expected profit, Sweet Husks should double production.
D) Sweet Husks is maximizing expected profit.
D) Sweet Husks is maximizing expected profit.
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Consider the following two situations. (i) You purchase a $10 movie ticket in advance over the Internet, but when arriving at the theater, you realize that you lost the ticket. The only way to see the movie is to purchase a new ticket
(ii) On the way to seeing a movie, you drop a $10 bill. You still can afford the movie, but you have lost the $10. How should you, a rational person, respond to the two situations? A) You should still see the movie in both situations. B) You should respond the same way to each situation, whether it is to see the movie or not. C) In the first situation, you should skip the movie; in the second, you should still see the movie. D) In each situation, you should not see the movie.
In the price-leadership model,
a. firms believe that price increases result in a very elastic demand, while price decreases result in an inelastic demand for their product. b. each firm acts as a price taker. c. one dominant firm takes the reactions of all other firms into account in its output and pricing decisions. d. firms coordinate their decisions to act as multiplant monopolies.
If the average cost of producing 10 sweaters is $6.50 and the marginal cost of producing the tenth sweater is $6.25, the average cost of producing 10 sweaters will be:
A. less than $6.50. B. more than $6.50. C. exactly $6.25. D. $6.50.
For this question, assume that the economy is initially operating at the natural level of output. An increase in the price of oil will cause which of the following in the medium run?
A) a reduction in the interest rate B) a reduction in output and an increase in the aggregate price level C) a reduction in output and a reduction in the interest rate D) a reduction in unemployment, an increase in the nominal wage and an increase in the aggregate price level E) a reduction in the aggregate price level and no change in output