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indigoelephant292Lv1

11 Dec 2019

Inflation in an economy implies that:

(i) that real GDP is overstated due to the higher price level.

(ii) the average price level has increased over a stated period of time.

(iii) stores have increased their prices for no other reason than to earn more profit.

(iv) the price of every good has increased.

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Reid WolffLv2

2 Apr 2020

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Dalum Papir A/S is almost halfway through its second century as a Danish paper manufacturer. Years ago, the firm was one of many paper companies, but now it constitutes one- half of Denmark's two-firm paper industry. The company utilizes highly energy-efficient techniques to manufacture glossy paper from recycled materials for magazines. Dalum Papir has had little choice but to conserve energy. Government taxation has boosted energy prices more than 45 percent above the U.S. level. Also, like other Danish firms, Dalum Papir must meet government-mandated standards for energy conservation.

Ever since the 1970s, when a worldwide spike in oil prices set off a prolonged recession, Denmark's government has sought to shield the nation's economy from future aggregate supply shocks induced by jumps in energy prices. Toward that end, it has enacted high energy taxes and tough regulatory conservation measures. A consequence is that Danish oil consumption per $1 million of real GDP has declined by more than 30 percent - to 120 tons o oil per $1 million of real GDP - over the last 30 years. Indeed, Denmark's total oil consumption has remained unchanged since the late 1970s. Thus, consistent with the government's intent, whenever oil prices suddenly shoot up, Denmark's economy tends to experience smaller aggregate supply shocks than it did in years past.

As the experience of Dalum Papir and the dwindling Danish paper, industry illustrates, however, the government's quest for aggregate supply stability has come at the cost of growth in the production of goods and services. Since the late 1970s, Denmark's real GDP has doubled, whereas U.S. real GDP has quadrupled. During that period, total U.S. oil consumption has increased by more than 40 percent, yet because U.S. real GDP has increased fourfold, U.S. oil consumption per $1 million of real GDP has fallen by more than 25 percent - almost as much as the percentage decline in Danish oil consumption per $1 million in real GDP. Thus, although the Danish economy is less susceptible than the U.S. economy to aggregate supply shocks, Denmark's aggregate supply is growing at about half the pace at which the U.S. aggregate supply is expanding.

1. Why do unexpected variations in energy prices generate aggregate supply shocks, which sudden changes in total planned expenditures do not?

2. Other things being equal, why might we expect the Danish price level to be more stable over time than the U.S. price level?

bronzemuskrat540

Part 1.Choose the correct answer of the following:

1.In a market economy, economic activity is guided by

a.Self-interest and prices

b.The government.

c.Corporations.

d. Central planners.

2. Which of the following decisions must be made by all economies?

a.How much to produce? When to produce? How much does it cost?

b.What to produce? How to produce? For whom to produce?

c.What is the price? Who will produce it? Who will consume it?

d. None of the above

3.Since the resources used in the production of goods and services are limited, society must:

a.Reduce the use of those resources

b.Try to get more resources

c.Make choices about how to use resources

d.Focus on their most abundant resource

4.Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

a.Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

b.There is no such thing as a free lunch.

c.People buy more when prices are low than when prices are high.

d. No matter how much people earn, they tend to spend more than they earn.

5.If real GDP increased by 2 percent, then

a.Government spending increased by 2 percent

b.The price level has increased by 2 percent

c.Real output/production has increased by 2 percent

d. The increase might have been caused by an increase in the price level or output, but we cannot tell for sure

6. Which of the following would show an efficient economy?

a.Uses the least costly amount of resources available

b.Has a small amount of people who do not work

c.Resources are used to make the most goods and services possible

d.None of the above

7.What is the type of unemployment that occurs when people take time to find a job?

a.cyclical

b.frictional

c.Disguised

d.structural

emeraldoyster872

If a monopolist or a perfectly competitive firm is producing at a break-even point, then:
i. average revenue is equal to average variable cost
ii. average revenue is equal to average total cost
iii. total revenue is equal to total variable cost
iv. total revenue is equal to total cost

iii

i and iii

ii and iv

A natural monopoly, such as a local electricity provider, is the result of:
i. a firm owning or controlling a key input used in the production process
ii. economies of scale existing over a wide range of output
iii. long-run average total costs declining continuously as output increases
iv. long-run total costs declining continuously as output increases

What do economies of scale, the exclusive ownership of essential raw materials used in the production process, and patents have in common?

they are all barriers to entry

they all help explain why a monopolists demand and marginal revenue curves are identical

they must all be present before a monopolist may practice price discrimination

they all help explain why a firms short run average total cost curve is U-shaped

#10

The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies:

to both perfectly competitive firms and monopolies

only to monopolies

only to perfectly competitive firms

only to firms that can employ discriminatory pricing strategies

#11

A monopoly is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $8 per unit and is incurring average variable costs of $5 per unit and average total costs of $10 per unit. Given this information, it may be concluded that the firm:

is operating at maximum total profit

is operating at a loss that could be reduced by shutting down

is operating at a profit that could be increased by producing more output

is operating at a loss that is less than the loss incurred by shutting down

#12

Suppose the demand function for a profit maximizing monopolists good is P = 120 - 0.2Q, its total cost function is TC = 40 + 4Q + Q2, and its marginal cost function is MC = 4 + 2Q. If the firm uses a uniform pricing strategy, then rounded to the nearest unit of output and to the nearest dollar the firm will:

produce 48 units of output, charge a price of $110, and earn a total profit of $5280

produce 48 units of output, charge a price of $110, and earn a total profit of $2744

produce 52 units of output, charge a price of $134, and earn a total profit of $5322

produce 52 units of output, charge a price of $134, and earn a total profit of $4016