Refer to the table below. Suppose the perfectly competitive market for dairy products had a 40 percent chance of a high price of $3.00 and a 60 percent chance of a low price of $2.00. However, both Happy Cows and Free Cows have revised their probabilities and now believe that the probability of a high price of $3.00 is 80 percent and the probability of a low price of $2.00 is 20 percent. If the
managers of Happy Cows want to maximize expected profit based on the new probabilities by how much will they change the quantity produced?
Happy Cows and Free Cows are two separate perfectly competitive dairy farms. The table above shows the respective firms' marginal cost at various production levels.
A) Happy Cows will decrease their production by 20 units.
B) Happy Cows will decrease their production by 40 units.
C) Happy Cows will increase their production by 40 units.
D) Happy Cows will increase their production by 20 units.
C) Happy Cows will increase their production by 40 units.
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If the Fed fears inflation, then the Fed
A) directs banks to raise the nominal interest rate. B) will increase the income tax rate on interest income. C) directs banks to lower the nominal interest rate. D) will sell government securities in the open market. E) will buy government securities in the open market.
Briefly explain what effect a reduction in the saving rate will have on growth
What will be an ideal response?