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In 2010, the money supply, M1, was $1,832 billion.Nominal GDP was $14,660 billion. What was the velocity of money measured using M1?
Suppose that the production function were . Assume that A = 100,000, and that the current level of the capital stock is 10,000.
Suppose that the production function is Y = A K1/4L3/4.What is the marginal product of labor (MPL)?
Draw a graph of the aggregate production function with capital, K, on the horizontal axis. Why does it have the shape that you have drawn?
Suppose that it is known that labor receives 25% of national income. With a Cobb-Douglas production function and an initial level of real GDP of $10,000, what happens to real GDP if both capital and l
Real GDP per hour worked in the United States grew by 2.17% per year from 1949 to 2009, and capital per hour worked grew at the rate of 2.27% per year during the same years.
Suppose that the production function for the economy is: Assume that real GDP is $12,000 billion, the capital stock is $40,000 billion, and the labor supply is 200 billion hours.
Suppose the airline industry consisted of only two firms: American and Texas Air Corp. Let the two firms have identical cost functions, C(q) = 40q. Assume that the demand curve for the industry is giv
Suppose that two competing firms, A and B, produce a homogeneous good. Both firms have a marginal cost of MC = $50. Describe what would happen to output and price in each of the following situations i
Returning to the duopoly of part (b),suppose Firm 1 abides by the agreement but Firm 2 cheats by increasing production. How many widgets will Firm 2 produce? What will be each firm"s profits?
Suppose a second firm enters the market. Let Ql be the output of the first firm and Q2 be the output of the second. Market demand is now given by Ql + Q2 = 53-P Assuming that this second firm has the
Suppose both firms have entered the industry. What is the joint profit-maximizing level of output? How much will each firm produce? How would your answer change if the firms have not yet entered the i
The kinked demand curve describes price rigidity. Explain how the model works. What are its limitations? Why does price rigidity occur in oligopolistic markets?
Why is the Cournot equilibrium stable? (i.e., Why don"t firms have any incentive to change their output levels once in equilibrium?) Even if they can"t collude, why don"t firms set their outputs at th
On a diagram, draw the marginal cost curves for the two factories, the average and marginal revenue curves, and the total marginal cost curve (i.e., the marginal cost of producing Q = Q1 + Q2)" Indica
Suppose a profit-maximizing monopolist is producing 800 units of output and is charging a price of $40 per\ unit.If the elasticity of demand for the product is -2, find the marginal cost Of the last u
Where Q is weekly production and P is price, measured in cents per unit. The firm"s cost function is given by C = 60Q + 25,000.Assume that the firm maximizes profits.
Will an increase in the demand for a monopolist"s product always result in a higher price? Explain. Will an increase in the supply facing a monopsonist buyer always result in a lower price? Explain.
Why is there a social cost to monopsony power? If the gains to buyers from monopsony power could be redistributed to sellers, would the social cost of monopsony power be eliminated? Explain briefly.
Why will a monopolist"s output increase if the government forces it to lower its price? If the government wants to set a price ceiling that maximizes the monopolist"s output, what price should it set?
Why is there a social cost to monopoly power? If the gains to producers from monopoly power could be redistributed to consumers, would the social cost of monopoly power be eliminated? Explain briefly.
We write the percentage markup of price over marginal cost as (P - MC)/P. For a profit-maximizing monopolist, how does this markup depend on the elasticity of demand? Why can this markup be viewed as
Cigarettes are subject to a federal tax, which was about 40 cents per pack in 2007.What does this tax do to the market-clearing price and quantity?
Currently, the social security payroll tax in the United States is evenly divided between employers and employees. Employers must pay the government a tax of 6.2 percent of the wages they pay, and emp
Find the domestic price of hula beans that will result if the tariff is imposed. Also compute the dollar gain or loss to domestic consumers, domestic producers, and government revenue from the tariff.