Macroeconomics Answers

You have to determine the optimal number of trucks that the company should buy in order to use them in their projects. Let denote "Y" as the number of trucks. The Marignal Benefit to the company is given by the expression: MB = 80,000 - Y.
The Marginal Cost given by the expression: MC = 10,000 + (1/2,000)Y2

a. Please calculate the optimal amount of trucks that this company should buy and include a diagram.

b. Provide some reasons that might explain the slopes of the marginal benefit and marginal cost curves.

c. Assume that marginal cost is LOWER than marginal benefit, should more trucks be bought? Illustrate.

2. Apply your knowledge of the AD/AS model to predict the effect on economic variables (i.e., P, RGDP, interest rates, wages, savings and spending) of some events on the U.S. economy. Diagram the effect of the following events. Be sure to explain the effects in the short run and effects in the long run for each question, in words. To keep things clear, assume that in each case the economy starts out at long-run equilibrium.

b. Tensions in South America dramatically increase the price of coffee. For the sake of argument, suppose coffee is an important input in many industries, including computer programming, transportation, and financial services.

2. Apply your knowledge of the AD/AS model to predict the effect on economic variables (i.e., P, RGDP, interest rates, wages, savings and spending) of some events on the U.S. economy. Diagram the effect of the following events. Be sure to explain the effects in the short run and effects in the long run for each question, in words. To keep things clear, assume that in each case the economy starts out at long-run equilibrium.
a. Labor unions become better organized, and this allows them to drive up wages in the short run in the U.S.
Answer:

Explain the process through which an economy returns to long-run equilibrium in the
AD/AS model when output is above full employment.

Explain the process through which an economy returns to long-run equilibrium in the AD/AS model when output is below full employment

Explain an important assumption behind the upward slope of the AS curve

True or False:
If the economy is near the full-employment level of output, the AD/AS analysis of a change in government spending or taxation will be different from the Keynesian analysis.

The federal government notices the economy is heading into a recession, and determines to engage in expansionary fiscal policy. However, six months later, when the policy is enacted the economy is enjoying very low unemployment. What happens?
A. The economy must still be in a recession, since it's been only six months, so the expansionary policy will pull the economy out of the recession.
B. The expansionary policy causes an initial increase in AD, which leads to a decrease in AS.
C. The expansionary policy causes the price level to fall.
D. The expansionary fiscal policy shifts the long-run AS curve to the left.
The expansionary fiscal policy shifts the long-run AS curve to the right.

State one reason why supply-side economics (reducing corporate and individual taxes) has not reduced income inequality?

If leakages are less than injections, equilibrium output will be

Ad Venture is a company that produces advertising video clips. Their supply curve is Qs=-2W+6P, where
W (in 10s) is the hourly wage that the company pays their workers and P (in 1000s) is the ongoing market
price for a 1-minute commercial.
a) If the wage is $35, how much should the market price be so that Ad Venture produces 8 videos?
b) At the price you have determined at point a., how does the number of videos supplied change if the
wage decreases to $30? Show this situation in your graph.