According to the kinked demand curve model, if there is a modest increase in a firm's variable production costs, what is likely to happen to the firm's profit-maximizing level of output and the amount of profit earned by the firm? Why?
What will be an ideal response?
Given the way the kinked demand curve model is constructed, there is a discontinuity in the firm's marginal revenue function at the equilibrium price and output level. As a result, marginal cost can vary by some amount and leave the profit-maximizing level of output unaffected. If this is the case and variable costs increase, the firm's total revenues will be unaffected but its total costs of production will be higher. Thus, the firm's price and output levels remain the same, but total profit decreases.
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A quasi-public good differs from a public good in that unlike a public good, it is possible to keep those who do not pay for the quasi-public good from enjoying the benefits of the good
Indicate whether the statement is true or false
For much of the 1940s, 50s and 60s, macroeconomic policymaking in the U.S. and abroad was dominated by:
a. the ideas advanced in Keynes's General Theory. b. the ideas advanced in Friedman's Monetary History of the U.S. c. the supply-side theories of Arthur Laffer and David Stockman. d. Robert Lucas's theories of business cycles.