The real GDP and actual price level when the actual price level exceeds the expected price level. Concept Introduction: Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output. Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Question

The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barriers to entry. Price (dollars) 24 8 MC ATC MR 30 D 45 50 Quantity/time The firm will maximize its profit at a quantity of units. After choosing the profit maximizing quantity, the firm will charge a price of The firm will receive $ in revenue at the profit-maximizing quantity. The total cost of production for this profit-maximizing quantity is S The maximum profit the firm can earn in this situation is $ per unit for this output. How will the situation change over time? Profits will attract rival firms into the market until the profit-maximizing price falls to the level of per-unit cost. ◇ Losses will induce firms to leave this market until the profit maximizing price falls to zero. The market will adjust until the price charged by this firm no longer exceeds marginal cost at the profit-maximizing quantity. This market is already in long-run equilibrium, and will not…

Answer 1

Question

Chapter 10, Problem 3P

Sub-part

A

To determine

The real GDP and actual price level when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

B

To determine

The expansionary and recessionary Gap when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

C

To determine

The real GDP and actual price level when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

D

To determine

The expansionary and recessionary Gap when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

E

To determine

The real GDP and actual price level when the actual price level equals the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

F

To determine

The expansionary and recessionary Gap when the actual price level is equal to the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

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The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barriers to entry. Price (dollars) 24 8 MC ATC MR 30 D 45 50 Quantity/time The firm will maximize its profit at a quantity of units. After choosing the profit maximizing quantity, the firm will charge a price of The firm will receive $ in revenue at the profit-maximizing quantity. The total cost of production for this profit-maximizing quantity is S The maximum profit the firm can earn in this situation is $ per unit for this output. How will the situation change over time? Profits will attract rival firms into the market until the profit-maximizing price falls to the level of per-unit cost. ◇ Losses will induce firms to leave this market until the profit maximizing price falls to zero. The market will adjust until the price charged by this firm no longer exceeds marginal cost at the profit-maximizing quantity. This market is already in long-run equilibrium, and will not…

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Answer 2

Question

Chapter 10, Problem 3P

Sub-part

A

To determine

The real GDP and actual price level when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

B

To determine

The expansionary and recessionary Gap when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

C

To determine

The real GDP and actual price level when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

D

To determine

The expansionary and recessionary Gap when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

E

To determine

The real GDP and actual price level when the actual price level equals the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

F

To determine

The expansionary and recessionary Gap when the actual price level is equal to the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Expert Solution & Answer

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Answer 3

Question

Chapter 10, Problem 3P

Sub-part

A

To determine

The real GDP and actual price level when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

B

To determine

The expansionary and recessionary Gap when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

C

To determine

The real GDP and actual price level when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

D

To determine

The expansionary and recessionary Gap when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

E

To determine

The real GDP and actual price level when the actual price level equals the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

F

To determine

The expansionary and recessionary Gap when the actual price level is equal to the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Expert Solution & Answer

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Answer 4

Question

Chapter 10, Problem 3P

Sub-part

A

To determine

The real GDP and actual price level when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

B

To determine

The expansionary and recessionary Gap when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

C

To determine

The real GDP and actual price level when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

D

To determine

The expansionary and recessionary Gap when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

E

To determine

The real GDP and actual price level when the actual price level equals the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

F

To determine

The expansionary and recessionary Gap when the actual price level is equal to the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Expert Solution & Answer

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Answer 5

Chapter 10, Problem 3P

Sub-part

A

To determine

The real GDP and actual price level when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

B

To determine

The expansionary and recessionary Gap when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

C

To determine

The real GDP and actual price level when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

D

To determine

The expansionary and recessionary Gap when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

E

To determine

The real GDP and actual price level when the actual price level equals the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Sub-part

F

To determine

The expansionary and recessionary Gap when the actual price level is equal to the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 6

Chapter 10, Problem 3P

Sub-part

A

To determine

The real GDP and actual price level when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 7

Chapter 10, Problem 3P

Sub-part

A

To determine

The real GDP and actual price level when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 8

Sub-part

B

To determine

The expansionary and recessionary Gap when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 9

Sub-part

B

To determine

The expansionary and recessionary Gap when the actual price level exceeds the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 10

Sub-part

C

To determine

The real GDP and actual price level when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 11

Sub-part

C

To determine

The real GDP and actual price level when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 12

Sub-part

D

To determine

The expansionary and recessionary Gap when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 13

Sub-part

D

To determine

The expansionary and recessionary Gap when the actual price level is lower than the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 14

Sub-part

E

To determine

The real GDP and actual price level when the actual price level equals the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 15

Sub-part

E

To determine

The real GDP and actual price level when the actual price level equals the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 16

Sub-part

F

To determine

The expansionary and recessionary Gap when the actual price level is equal to the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 17

Sub-part

F

To determine

The expansionary and recessionary Gap when the actual price level is equal to the expected price level.

Concept Introduction:

Expansionary Gap: Expansionary Gap is the gap between actual output and potential output under full employment situation, when actual output is more than potential output.

Recessionary Gap: Recessionary Gap is the gap between actual output and potential output under full employment situation, when actual output is less than potential output.

Answer 18

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Answer 19

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Answer 29

Ch. 10 - Prob. 1P Ch. 10 - Prob. 2P Ch. 10 - Prob. 3P Ch. 10 - Prob. 4P Ch. 10 - Prob. 5P Ch. 10 - Prob. 6P

Solution Summary: The author explains the expansionary and recessionary gap between actual output and potential output under full employment situation.

Chapter 10 Solutions