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A firm uses a single plant with costs C = 160 + 16Q + .1Q2 and faces the price equation
P = 96 - .4Q.
a) Find the firms profit maximizing price and quantity. What is its profit?
b) The firms production manager claims that the firms average cost of production is minimized at an output of 40 units. Furthermore, she claims that 40 units is the firm\'s profit-maximizing level of output. Explain whether these claims are correct.
c) Could the firm increase its profit by using a second plant (with costs identical to the first) to produce the output in part A? Explain.
The economy of a country called Econoland is described by the following desired aggregate expenditure components (all figures in billions of $). For the purposes of this question, the first set of equations will be referred to as fiscal policy1.
Suppose the level of autonomous expenditure, which we could call A, rises by AA. What is the effect on the level of equilibrium national income?
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Bridget has limited income and consumes only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese.
Assume that the Bank of China wishes to peg the rate of exchange of its currency, the yuan, in terms of the US dollar. In each of the following situations, should it add or subtract from its dollar foreign exchange reserves? Why?
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Use a production possibility frontier to illustrate the probable results of your fiscal policy. By how much did consumption change? By how much did savings change?
Evaluate the following: The laws of supply and demand cannot apply to the labor market because labor is not a commodity to be bought and sold like machines.
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