In the medium run, an increase in inflation causes
A) an increase in the opportunity cost of holding money.
B) a reduction in the opportunity cost of holding money.
C) no change in the opportunity cost of holding money.
D) individuals to switch from holding bonds to money and increase their real money balances.
A
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Use the above figure. At equilibrium, the exchange rate is
A) 1 euro = $1.25. B) $0.80 = 1.25 euro. C) $1 = 1.25 euro. D) $1 = 8 euros.
Three hundred paper mills compete in the paper market. The total cost of production (in dollars) for each mill is given by the formula TC = 1,000Qmill + (Qmill)2, where Qmill indicates the mills annual production in thousands of tons. The marginal external cost of a mill's production (in dollars) is given by the formula MEC = 200 + 2Qmill. Finally, annual market demand (in thousands of tons) is given by the formula Qd = 200,000 - 100P. What is the efficient quantity?
A. 34,286 B. 131,429 C. 1,200 D. 90,000