Economics Answers

Which is a natural barrier to the entry of a new farm in an industry

Two firms face the following demand curve: P = 50 – 5Q, where Q = Q1 + Q2. The firms cost functions are C1 (Q1) = 20 + 10Q1 for firm 1 and C2 (Q2) = 10 + 12Q2 for firm 2.
Suppose both firms have entered the industry. What is the joint profit maximizing level of output

Explain the relationship between output, saving, and investment. Explain what condition
must occur for each of the following to occur: (1) the capital stock to increase; (2) the capital
stock to decrease; and (3) the capital stock to remain constant with aid of a diagram.

It is very well known by economists and policymakers that, in practice, potential
output is very hard to measure. In particular, different approaches of measurement
give very different levels of potential output. Does this uncertainty about
the measurement of potential output constitute challenges for economic policy?
Why or why not?

1. Given that a monopoly’s marginal revenue curve is strictly downward sloping, use math and a graph to show why a monopoly’s revenue curve reaches its maximum at a larger quantity than does its profit curve
2. Suppose a firm has market power and faces a downward sloping demand curve for its product, and its marginal cost curve is upward sloping.
If the firm reduces its price, then consumer surplus increases, producer surplus may increase or decrease.Explain this statement with a graph.
3. A firm is a natural monopoly. Its marginal cost curve is flat, and its average cost curve is downward sloping (because it has a fixed cost). The firm can perfectly price discriminate.
a) Use a graph to show how much the monopoly produces, Q*.
b) Show graphically and mathematically that a monopoly might shut down if it can only set a single price butoperate if it can perfectly price discriminate.

Think about an economy initially on its long run equilibrium. Assume that
autonomous consumption spending decreases. Explain how this economy will
go back to its long run equilibrium using the AS-AD model.

a consumer buys 10 unita of a good at the price of 11 per unit then the price falls ro 9 per unit he spends rupees 90 on the goods calculate the price elasicticty of demand

Will the ceiling to output be in any way affected by the short-run rate of growth of GDP? If so, how?
Under what circumstances would you expect a rise in national income to cause a large accelerator effect? 4. Assume that interest rates fall. Under what circumstances will this lead to (a) a large rise in business investment; (b) little or no change in business investment?

If injections exceed withdrawals, will GDP go on rising indefinitely, or will a new equilibrium be reached? explain how

1. Receive saving from household
2. Provide labour to government and business
3. Sell good and services to the other participants
4. Make loan to household
5. Earns wages from other participants