Economics Answers

When economic profits exists for a firm, it is very tenuous because:
1) costs will inevitably increase and eliminate profit
2) price will fall because market supply will increase
3) firms are driven to increase output to the point where average total cost will equal price
4) firms are driven to reduce output until average total cost equals price

The statement that marginal cost=marginal revenue leads to profit maximization or loss minimization is true....
1) all the time
2) only in the long run
3) only if marginal cost is rising at the point of equality
4) only if the average total cost is falling at a point of equality

Now assume that there is an increase in government expenditure (G), an
increase in the labour force and a reduction in oil prices. By using the AS-AD graph,
explain the effects of these changes on equilibrium output and equilibrium price level
in the Short-Run. Explain each step in your graph.

Now suppose government expenditure (G) increases and there is an increase in
the overall price level (P). By using the IS curve and Fed (Central Bank) Rule curve
graph, explain the effect of these changes on the interest rate and output in the ShortRun. Explain each step in your graph

If C=700+0.8Yd, I= 400, Tax=10%, & G= 200, then:

Derive equation for AD
Determine equilibrium value of output.
Calculate value of multiplier
Repeat first 3 parts if Govt. spending is increased to 300
Show changes through graph..

QNO2 Crystal Ball Corp. has estimated its demand and cost functions as follows:
Q = 80 - 5P
C = 30 + 2Q + 0.5Q 2
where P is in $, Q is in thousands of units and C is in $,000.
a. Calculate the profit-maximizing price and output.
b. Calculate the size of the above profit.
c. Calculate the price elasticity of demand at the above output; is demand elastic or inelastic here? What should it be?
d. Calculate the marginal cost at the above output.
e. If unit costs rise by $2 at all levels of output and the firm raises its price by the same amount, what profit is made?
f. What is the profit-maximizing strategy given the above rise in costs?
g. How much profit is the firm forgoing by raising its price $2?

American middle classes found debt-free Household| A Quick Analysis of Consumer Debt Statics?

Suppose you observe the following situation:

Security
Beta
Expected Return
Pete Corp.

1.30


.140

Repete Co.

.99


.113



a.
Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b.
What is the risk-free rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

A stock has an expected return of 12.2 percent, the risk-free rate is 6 percent, and the market risk premium is 10 percent. What must the beta of this stock be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

What are the break-even point and the shutdown point? What is the significance of these points in relation to supplier’s decisions?