What is the effect on aggregate demand and the AD curve from either an increase in government expenditure or a cut in taxes?
What will be an ideal response?
Both an increase in government expenditure and a cut in taxes increase aggregate demand and shift the AD curve rightward.
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The above figure illustrates the market for electric power that is served by the one utility in Alberta, Canada
a. If the government did not regulate this utility, what would be the price of a kilowatt hour in this region and how much power would be generated? b. If the government regulates the utility and chooses an average cost pricing rule, what would be the price of a kilowatt hour and how much power would be generated? c. If the government regulates the utility and chooses a marginal cost pricing rule, what would be the price of a kilowatt hour and how much power would be generated?
Average costs
a. fall at all levels of output b. are falling when marginal costs are below average costs and rising when marginal costs are above average costs c. are falling when marginal costs are above average costs and rising when marginal costs are below average costs d. does not vary with output