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Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 18RQ: What is deflation?

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Question

The horizontal axis labeled quantity ranges from 0 to 26 in increments of 2. The vertical axis labeled dollar ranges from 0 to 220 in increments of 20. A line labeled M R begins at the point (0, 200) goes down to the right and ends at the point (10, 0). A second line labeled D begins at the point (0, 200) goes down to the right and ends at the point (20, 0). An upward-facing curve labeled M C begins at the point (3, 85) goes down to the right with decreasing steepness to a low point at (7, 60) then goes up to the right with increasing steepness to end at the point (18, 200). A second upward-facing curve labeled A T C begins at the point (4, 150) goes down to the right with decreasing steepness to a low point at (12, 85) then goes up to the right with increasing steepness to end at the point (21, 160). The curve M C intersects the line M R at (7, 60), the line D at (12, 85) and the curve A T C at (12, 85). All values are approximated."

a. What is the firm’s optimal output?

units

b. What is the firm’s optimal price?

c. What are the firm’s maximum profits?

d. What adjustments should the manager be anticipating?

multiple choice