Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, what is each of the active firms' profit per unit in the short run equilibrium?
A. $3.67 per unit
B. $20.33 per unit
C. $24.00 per unit
D. $6.67 per unit
A. $3.67 per unit
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A country initially has an equilibrium real interest rate of 4 percent and an equilibrium quantity of investment of $2 trillion. The government's budget deficit then increases. According to the crowding-out effect, the
A) demand for loanable funds curve shifts rightward, the real interest rate rises, and investment decreases. B) supply of loanable funds curve shifts rightward, the real interest rate rises, and investment increases. C) supply of loanable funds curve shifts leftward, the real interest rate falls, and investment decreases. D) demand for loanable funds curve shifts leftward, the real interest rate falls, and investment increases. E) demand for loanable funds curve shifts rightward, the real interest rate falls, and investment increases.
If oil prices increase, then in the short run, real GDP will ________ and the price level will ________
A) increase; rise B) increase; fall C) decrease; rise D) decrease; fall E) not change; rise
Refer to the scenario above. Which of the following will happen in equilibrium if Harry is known to be trustworthy?
A) Tom will trust Harry and Harry will cooperate. B) Tom will trust Harry and Harry will defect. C) Neither of them will make any money. D) Only Harry will make money.
Which of the following statements about demand is true?
a. Since most college students want a Mercedes sports coupe, their demand for it is high. b. If price increases, the demand curve shifts to the right. c. The demand curve for bacon will not shift when the price of bacon changes. d. If a supply curve shifts, thereby changing the price, the demand curve will shift as well. e. If a demand curve shifts, the supply curve will shift as well, whether or not the price changes.