When government purchases increase, the spending multiplier indicates the _____
a. amount of movement along the aggregate demand curve
b. amount of movement along the aggregate supply curve
c. size of the rightward shift of the aggregate demand curve at a given price level
d. size of the rightward shift of the aggregate supply curve at a given price level
e. size of the expansionary gap
c
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Consider two Cournot competitors selling complementary goods with demand curves given by:
p1 = 100 - q1 + .5q2 p2 = 100 - q2 + .5q1 Suppose each firm has a marginal and average cost of $10. a. What about the demand equations indicate that these goods are complements? How do they differ from the standard Cournot model? b. Find the equilibrium prices and quantities. c. Suppose the two firms merge. By doing so, the newly merged firm will act to maximize the joint profits ((q1,q2 ) = 1(q1,q2 ) + 2(q1,q2 )). Find the joint-profit maximizing price and quantities. d. Are the combined profits greater or smaller from merging? That is, is merging profitable for the firms? e. Are consumers better or worse off with the firms merging? How does this compare to the mergers of Cournot competitors selling substitutes? What does this imply about antitrust policy towards mergers of firms selling complementary goods (such as airplanes and engines, computers and processors, cars and tire companies, etc).
An effluent fee
A) is a reward to companies using production methods that create positive externalities. B) is also called a pollution subsidy. C) gives a firm the right to pollute if it pays a tax on what it discharges. D) is intended to influence the market by increasing supply and decreasing price.