Firms
If supply is relatively inelastic and demand is relatively elastic, will producers or consumers take the burden on a per-unit tax?
Producers
If aggregate demand increases and short run aggregate supply decreases, what will be the short-run effects on output and price level?
PL Increase, Output Indeterminate
What is the rule that tells firms how many workers to hire in a perfectly competitive factor market?
MFC = MRP
What is the difference between accounting profit and economic profit?
Economic profit includes implicit costs
What is the most liquid asset?
Cash
If a monopoly is producing where marginal revenue is zero, is the firm at the profit-max quantity, the efficient quantity, or neither?
Neither
How will an increase in the cost of resources used in production affect the short-run Phillips curve?
rightward shift
Where does the marginal cost curve intersect the ATC curve?
minimum ATC
If Dashiel is working at McDonald’s making $10,000, but could be working at Wendy’s making $15,000, what is his economic profit?
-$5,000
Assets:
Total reserves: $5,000 Loans: $35,000
Liabilities:
Demand Deposits: $40,000
The reserve ratio is 10%. What is the amount of new loans the bank could create?
$1,000
Why do perfectly competitive firms earn zero economic profit in the long run?
No barriers to entry or exit.
How will an decrease in the cost of resources used in production affect the long-run Phillips curve?
It won't change
Why does the marginal cost curve dip then slope up?
Decreasing Marginal Returns
Rishiland: 50 chairs / 200 TVs
Dashlandia: 20 chairs / 60 TVs
Who has the comparative advantage in producing chairs?
Dashlandia
Assume all banks hold no excess reserves and the reserve requirement is 20%. If the central bank of Aislandia buys $800 of bonds from Brynn’s Space Bank, what will be the increase in the money supply?
$4,000
What does it mean when marginal cost is below ATC?
ATC is decreasing
In an ample reserve system, how would the central bank respond when real output is below potential output?
Lower the interest rate on reserves
What does the vertical distance between the ATC and AVC costs represent?
Average Fixed Cost
If the cross price elasticity between Good X and Good Y is positive, what will happen to the price of Good Y when the price of Good X decreases?
Decrease
If a bank currently holds $50,000 in demand deposits, and $7,000 in reserves, with a 10% reserve requirement, what is the maximum amount the bank can loan out?
$2,000
If marginal revenue is greater than marginal cost, what should a firm do to maximize profit?
Increase output
If the demand for money increases, what open market operation will the central bank use to correct the output gap?
buy bonds
On the monopsony graph, why is the MFC curve above the supply curve?
The firm must raise wages for all of its workers to hire another worker
What curve on a monopoly graph illustrates the concept that producing an extra unit means lowering the price on all previous units?
Marginal Revenue
What is the current reserve requirement in the US?
0%