Economics Answers

Why is it the case in a long-run monopolistically competitive equilibrium that the firm’s demand curve is tangent to its average cost curve? Why could it not be a long-run equilibrium if the demand curve “cut through” the average cost curve? 

Recall that an exchange rate is the price of one currency in another. For example, it may take US $1.35 to buy 1 British Pound. Also recall the interest rates affect exchange rates. What do you predict will happen to the foreign exchange rate if interest rates in the United States increase more than in the UK? (In other words, which currency will become stronger?) How would such a change affect US exports to the UK? Would it be less expensive for an American tourist to take a vacation to London after the interest rate change? Be sure to clearly explain and justify your reasoning. 

The Federal Reserve raises reserve requirements.

What would likely result from this event?

A perfectly competitive firm is referred to as a

name 4 factors of production

An increase in supply indicates that

a) more is supplied at higher prices

b) indicates that more is supplied at lower prices

c) indicates that more is supplied at all prices

d) is illustrated by an upward shift of the supply curve

Explain using AS-AD model how the output eventually returns to the natural level in the medium-run, in response to a contractionary monetary policy.

Suppose, there is a rise in money demand for every level of income and interest rate. How will this affect the LM and the aggregate demand curve, if at all? Explain.

Explain the effects of increase in Govt. budget deficit on output, the interest rate, and the price level in short-run and in medium run model. in AD-AS

Following information shows that a firm offering a good at different prices to groups of consumers with different levels of willingness to pay. Inverse Demand for movies:

P₁ = 20 – 4Q₁ Inverse Demand for students:

P₂ = 10 – Q₂

MC = 4 LKR /ticket

(a) What price and quantity and maximizes profits if the firm charges each market?

(b) Demonstrate that charging different prices for the two groups results in higher profits than charging the same price for everyone.

(c) Graph the demand curves, the marginal revenue curves, the marginal cost curve and highlight the equilibrium.