The average cost for a typical electric-power-production firm is AC = 100 - 10Q + Q2 where Q is measured in billion kilowatt hours per day. At the current regulated price, consumers demand 4 billion kilowatt hours per day
Is this market a natural monopoly? If demand increases to 10 billion kilowatt hours, is this market a natural monopoly? Explain.
The firm enjoys economies of scale up to 5 billion kilowatt hours (kwhr) per day (Minimum AC). So, at 4 billion kwhr per day, the firm is a natural monopoly. At 10 billion kwhr per day, this firm is no longer a natural monopoly.
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Assume that the M1 multiplier is 2.5. If the Federal Reserve purchases $200 worth of government securities, the money supply will
A) rise by $200. B) rise by $500. C) fall by $200. D) fall by $500.
If the interest rate increases from 3 percent to 4 percent, other things constant, individuals will want to
a. save and borrow more b. save and borrow less c. save more and borrow less d. save less and borrow more e. borrow more but save the same amount