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In a competitive industry consisting of 5,000 firms, the short-run marginal cost curve for each
firm is given by MC = 100 + 20Q. The demand curve faced by the industry is given as P = 500 –
0.002Q. P and MC are in $/tonne and Q is in tones.
a. Find the equilibrium price and quantity sold, for the industry and for each firm.
b. Find the producer and consumer surpluses at the equilibrium price.
Q.1 The model of income determination is called Keynesian. What makes it Keynesian as apposed to classical?
Sketch the AC, AR, MR and MC curve without a scale
It is correct to conclude that the:
a) The monetary base is equal to cash in circulation.
b) The money supply is equal to the monetary base.
c) The money supply does not include sight deposits.
d) The monetary base is equal to banks’ cash reserves.
e) None of the above
It is incorrect to conclude that:
a) When the income tax rate is 0 and the multiplier is 10, the MPC = 0.9.
b) If the income tax rate is 0.1 and the MPC = 1, then the multiplier is equal to 10. c) If the income tax rate is 0.2 and the MPC = 0.75, then the multiplier is equal to 0.9375.
d) If the tax rate is 1 the MPC cannot be calculated.
e) None of the above
Suppose the consumption function is C = 100 + 0.95YD. If the tax rate changes from t = 0 to t = 30%, then the increase in government spending that leaves the equilibrium income unaffected is:
a) 1,478
b) 2,000
c) 2,570
d) 10,280
e) 570
In the long-run the IS-LM model predicts that:
a) Only monetary policy can change real output.
b) Only fiscal policy can change real output.
c) Both monetary and fiscal policy can change real output.
d) Monetary and fiscal policies change real output only when used together.
e) Neither monetary nor fiscal policy can change real output.
Contractionary monetary policies, other things being equal, will
a) Move the economy down a fixed aggregate demand curve.
b) Move the economy up a fixed aggregate demand curve.
c) Shift the aggregate demand curve to the right.
d) Shift the aggregate demand curve to the left.
e) None of the above.
n the long-run IS-LM model, the long-run effect of a contractionary fiscal policy is to: a) Increase real output and the interest rate.
b) Decrease real output and the interest rate.
c) Increase real output and leave the interest rate unchanged.
d) Decrease the interest rate and leave real output unchanged. e) Not change either real output or the interest rate.
Which one of the following will not likely occur as a result of the economy’s automatic stabilizers operating during periods of inflation?
a) The size of the investment and government spending multiplier falls.
b) The aggregate spending curve shifts upward.
c) The aggregate spending curve shifts downwards.
d) The MPC of national income is reduced.
e) The rate of inflation is slowed
Suppose the consumption function is C = 100 + 0.95YD. If the tax rate changes from t = 0 to t = 30%, then the increase in government spending that leaves the equilibrium income unaffected is:
a) 1,478
b) 2,000
c) 2,570
d) 10,280
e) 570
Other things equal, a decrease in the price level will
a) Move the economy down a given aggregate demand curve.
b) Move the economy up a given aggregate demand curve.
c) Shift the aggregate demand curve to the right.
d) Shift the aggregate demand curve to the left.
e) None of the above
01) The investment multiplier is
02)If the MPC for the economy is 0.8, the:
a) MPS is 1/0.8
b) The multiplier is 5.
c) The multiplier is undefined.
d) The MPS is 0.4
e) The multiplier is 0.8
Other things constant, an increase in the households’ willingness to save more at every level of income will cause the consumption function to:
a) Become flatter because the MPC rises.
b) Make a downward parallel shift.
c) Remain stationary but the saving function to shift upward.
d) Become steeper because the MPC declines.
e) Shift to the left and upwards.
Suppose that in a simple economy there is no government taxing or spending and no foreign trade. A correct statement of the multiplier is:
a) k = 1/mpc
b) k = 1/(1+mpc)
c) k = 1/(1-mps)
d) k = 1/(1-mpc)
e) k = 1/(mpc+mps)
If history repeats itself and we see a decline in the rate of money growth, what might you expect to happen to
a. Real output?
b. The inflation rate?
c. Interest rates?
1. If history repeats itself and we see a decline in the rate of money growth, what might you expect to happen to
a. Real output?
b. The inflation rate?
c. Interest rates?
1. If history repeats itself and we see a decline in the rate of money growth, what might you expect to happen to
a. Real output?
b. The inflation rate?
c. Interest rates?
