The data below relates to a pure monopoly and the product it produces. What is the profit-maximizing output and price for this firm?
A. P = $15; Q = 3
B. P = $12; Q = 5
C. P = $18; Q = 2
D. P = $14; Q = 4
Answer: D
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What will be an ideal response?
If the marginal propensity to consume is 0.75 and autonomous consumption spending will decrease by $30 billion, by how much would net taxes need to decrease in order to have no change in output? (Ignore any timing issues.)
a. $60 billion b. $30 billion c. $90 billion d. $120 billion e. $40 billion
Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship: P=A×M • P=Price Level • M=Money Supply • A=A composite of other factors, including real GDP, that change very slowly over time. How might an economist gather empirical data to test the proposed relationship between money and the price level?
A. Unlike researchers in the hard sciences, economists cannot study complex relationships using data. B. An economist would look for data on past changes in the money supply, and note the resulting changes in the price level C. An economist would persuade the Federal Reserve to change the money supply to various levels, and observe the resulting changes in the price level. D. Economists do not usually develop theoretical models of the economy but only analyze summary statistics about the current state of the economy.
“Due to lower grain prices, consumers can expect retail prices of choice beef to begin dropping slightly this spring with pork becoming cheaper after midsummer,” the Agriculture Department predicted. “This reflects increasing supply,” the
department said. Does the statement use the term “supply” correctly? What effects might this announcement have on consumer demand? Please provide the best answer for the statement.