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Suppose that a paper mill "feeds " a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $10, the second $9, the third $8, and so on, until the tenth unit increases profit by just $1. The cost the upstream mill incurs for producing enough paper to make one unit of boxes is $3.50. a. if the two companies are separate profit centers, and the upstream paper mill sets a single transfer price (the price the box company pays the paper mill), what price will it set, and how much money will the company make b. if the paper mill were forced to transfer at marginal cost, how much money would the company make?
How central banks increase the monetary base When the Central Bank cuts the target rate, they must simultaneously increase the monetary base by buying government securities. The
Suppose that a household in a two-period model has income of $30,000 in period 1 and $25,000 in period 2, and the interest rate is 75 percent. Assume that the price of the good is
when domestic currency becomes more valuable in terms of foreign currency, the domestic currency is said to have
The LM-curve in the AS-AD model The LM-curve will shift upwards (downward) when P is increases (decreases) in the AS-AD model is moved L
/* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-prior
Aggregate Supply (AS) We now shift our attention to the supply side of the macroeconomy. Aggregate supply explains the production and pricing side of the economy and the behav
In the keynesian cross model, assume the consuption function is given by C=200=.75(Y-T) and planned investment=100, government purchases and taxes are each of them 100. a) Draw a g
1. # of sellers, # of buyers 2. entry and exit conditions 3. product characteristics 4. short run P&Q determinations and the resulting 3 possibilities for excess profit (graphs ar
Neo-classical synthesis is a synthesis of classical model and Keynesian model. In brief, it states that Keynesian model is correct in the short run whereas the classical analysis i
A monopolist faces the following demand function for its product: Q = 45 - 5P The fixed costs of the monopolist are $12 and the variable costs are $5 per unit. a) What are the pro
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