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Characterize each of the following statements as true or false, and explain your answer.
a. If marginal revenue is less than average revenue, the demand curve will be downward sloping.
b. Profits will be maximized when total revenue equals total cost.
c. Given a downward sloping demand curve and positive marginal costs, profit maximizing firms will always sell less output higher prices than will revenue maximizing firms.
d. Marginal cost must be falling for average cost to decline as output expands.
e. Marginal profit is the difference between marginal revenue and marginal cost will always equal zero at the profit maximizing activity level.
The demand function for VCRs has been estimated to be Qv = 123 - 1.7Pt + 46 Pm - 2.1Pv -5M, where Qv is the quantity of VCRs,Pt is the price of a videocassette, pmis the price of a movie, Pv is the price of a VCR, and M is income.
Do the estimated coefficients have the required signs to yield a-shaped AVC curve? Discuss the significance using the p-values.
Between your answers to parts b and c, which prices/capacity are best applied from a social welfare perspective? Why?
Suppose that a chair manufacturer is producing in the short run (with its existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers:
Calculate the price elasticity of demand for the product below using average values for the prices and quantities in your formula.
Prepare a demand schedule for both demand curves and prepare them on an Excel graph. Calculate the marginal revenue for each.
According to economist, if savings equal $5 trillion and spending equals $100 trillion, what will investment equal?
Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced.
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.
Problem on standard deviation
Find the velocity given that the market is in equilibrium. MD1 is the relevant curve and it is given that the real GDP is 30,000.
For each of the following concepts provide a definition, a complete explanation as to their significance, and a practical example.
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