Describe the macroeconomic model.

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Answer 1

Question

Chapter 4, Problem 1RQ

To determine

Describe the macroeconomic model.

Expert Solution & Answer

Explanation of Solution

Macroeconomic models are also toy versions of the real world that contain the key moving parts to give us an idea about how the real world really works.

In order to generate real insights, a model of ice cream production only needs a few key features in common with the real economy. For example, the more the workers, more ice cream can be produced, and if there are more machines, then more ice cream can be produced. If one gets a new idea for developing machines, then even more ice cream can be made with less number of workers.

In this case, the model can easily capture positive and diminishing returns to a factor, constant returns to scale, and increasing returns to ideas, but it is extremely simple. It helps one to forget unnecessary details about real life such as human emotions, the need for health care and nutrition, the distribution of income, natural resources, and so forth. Economics has progressed as a science when it has left things out.

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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…

Answer 2

Question

Chapter 4, Problem 1RQ

To determine

Describe the macroeconomic model.

Expert Solution & Answer

Explanation of Solution

Macroeconomic models are also toy versions of the real world that contain the key moving parts to give us an idea about how the real world really works.

In order to generate real insights, a model of ice cream production only needs a few key features in common with the real economy. For example, the more the workers, more ice cream can be produced, and if there are more machines, then more ice cream can be produced. If one gets a new idea for developing machines, then even more ice cream can be made with less number of workers.

In this case, the model can easily capture positive and diminishing returns to a factor, constant returns to scale, and increasing returns to ideas, but it is extremely simple. It helps one to forget unnecessary details about real life such as human emotions, the need for health care and nutrition, the distribution of income, natural resources, and so forth. Economics has progressed as a science when it has left things out.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 4, Problem 1RQ

To determine

Describe the macroeconomic model.

Expert Solution & Answer

Explanation of Solution

Macroeconomic models are also toy versions of the real world that contain the key moving parts to give us an idea about how the real world really works.

In order to generate real insights, a model of ice cream production only needs a few key features in common with the real economy. For example, the more the workers, more ice cream can be produced, and if there are more machines, then more ice cream can be produced. If one gets a new idea for developing machines, then even more ice cream can be made with less number of workers.

In this case, the model can easily capture positive and diminishing returns to a factor, constant returns to scale, and increasing returns to ideas, but it is extremely simple. It helps one to forget unnecessary details about real life such as human emotions, the need for health care and nutrition, the distribution of income, natural resources, and so forth. Economics has progressed as a science when it has left things out.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 4, Problem 1RQ

To determine

Describe the macroeconomic model.

Expert Solution & Answer

Explanation of Solution

Macroeconomic models are also toy versions of the real world that contain the key moving parts to give us an idea about how the real world really works.

In order to generate real insights, a model of ice cream production only needs a few key features in common with the real economy. For example, the more the workers, more ice cream can be produced, and if there are more machines, then more ice cream can be produced. If one gets a new idea for developing machines, then even more ice cream can be made with less number of workers.

In this case, the model can easily capture positive and diminishing returns to a factor, constant returns to scale, and increasing returns to ideas, but it is extremely simple. It helps one to forget unnecessary details about real life such as human emotions, the need for health care and nutrition, the distribution of income, natural resources, and so forth. Economics has progressed as a science when it has left things out.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 4, Problem 1RQ

To determine

Describe the macroeconomic model.

Expert Solution & Answer

Explanation of Solution

Macroeconomic models are also toy versions of the real world that contain the key moving parts to give us an idea about how the real world really works.

In order to generate real insights, a model of ice cream production only needs a few key features in common with the real economy. For example, the more the workers, more ice cream can be produced, and if there are more machines, then more ice cream can be produced. If one gets a new idea for developing machines, then even more ice cream can be made with less number of workers.

In this case, the model can easily capture positive and diminishing returns to a factor, constant returns to scale, and increasing returns to ideas, but it is extremely simple. It helps one to forget unnecessary details about real life such as human emotions, the need for health care and nutrition, the distribution of income, natural resources, and so forth. Economics has progressed as a science when it has left things out.

Answer 6

Chapter 4, Problem 1RQ

To determine

Describe the macroeconomic model.

Expert Solution & Answer

Explanation of Solution

Macroeconomic models are also toy versions of the real world that contain the key moving parts to give us an idea about how the real world really works.

In order to generate real insights, a model of ice cream production only needs a few key features in common with the real economy. For example, the more the workers, more ice cream can be produced, and if there are more machines, then more ice cream can be produced. If one gets a new idea for developing machines, then even more ice cream can be made with less number of workers.

In this case, the model can easily capture positive and diminishing returns to a factor, constant returns to scale, and increasing returns to ideas, but it is extremely simple. It helps one to forget unnecessary details about real life such as human emotions, the need for health care and nutrition, the distribution of income, natural resources, and so forth. Economics has progressed as a science when it has left things out.

Answer 7

Chapter 4, Problem 1RQ

To determine

Describe the macroeconomic model.

Answer 8

Expert Solution & Answer

Explanation of Solution

Macroeconomic models are also toy versions of the real world that contain the key moving parts to give us an idea about how the real world really works.

In order to generate real insights, a model of ice cream production only needs a few key features in common with the real economy. For example, the more the workers, more ice cream can be produced, and if there are more machines, then more ice cream can be produced. If one gets a new idea for developing machines, then even more ice cream can be made with less number of workers.

In this case, the model can easily capture positive and diminishing returns to a factor, constant returns to scale, and increasing returns to ideas, but it is extremely simple. It helps one to forget unnecessary details about real life such as human emotions, the need for health care and nutrition, the distribution of income, natural resources, and so forth. Economics has progressed as a science when it has left things out.