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1. It would be reasonable for a typical purely competitive wheat farmer to lower his price per bushel in order to sell more. The higher sales level will cause average fixed cost to decrease and this will result in more profit for the individual farmer. True or false, and why?
2. In other situations it would be reasonable for a purely competitive wheat farmer to raise his price per bushel because he could reduce his variable costs by selling less at a higher price. True or false, and why?
3. Suppose that a price support system for cotton requires the federal government to pay farmers $3,000 per acre to not plant cotton. How would you shift either the supply or demand curve for cotton to illustrate the effect of this action? In your answer describe only one shift, not two.
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Describe the present economic crisis situation in Europe. Why has it been so difficult for the Europeans to find a solution to this problem? Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..
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How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.
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