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Firm effects are more important the industry effects. What does this mean? Can you think of situations where this might not be true?
Consider the following Marginal Private Cost (MPC), Marginal Social Cost (MSC) and market demand curves. These curves relate to a market for a product, the production of which gene
Bruno's Lunch Counter is expanding and expects operating cash flows of $26,000 a year for 4 years as a result. This expansion requires $39,000 in new fixed assets. These assets wil
Subsidy programs are likely to have a number of secondary effects in addition to the direct effect on dairy prices. What impact do you suppose farm subsidies are likely to have on
In monopolistic competition: a) Firms face a perfectly elastic demand curve b) All products are homogeneous c) Firms make normal profits in the long run d) There are ba
Kate uses a sewing machine to alter and repair clothes for one year in her own small business, Kate's Tailoring. She earns $20,000 during the year for various sewing projects. In t
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Is it true that government revenues are increased because of lower tax rates? Ans) It is true to a point. The Laffer curve determines that revenues enhance as the tax rates rise
The Transmission Mechanism The mechanism by which the changes in monetary policy affect aggregate demand is called 'transmission mechanism'. Two stages in transmission mechanis
Let a macroeconomic model be of the following form: C = a + bY D a = 10 T = T 0 b = 4/5 G = G 0
The Widget Manufacturing Company must replace a widget machine, and is evaluating the capabilities of two systems. A requirement of management is that the machine chosen must be p
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