Nevermind. I think I get it. Thanks.</p>
I agree with Whiphi, and for d (just in case you’re wondering) the profit-maximizing would be at Q3 because for a perfectly competitive firm you would produce where MPC (or MC) = MPB (or MR/D/P, since those three are the same in this type of firm). Because you’re producing at Q3 and the social optimal point is at Q2, you need to tax the firm so that they produce less. The gov’t would impose a $5 per-unit tax in order to bring the quantity back to the socially-optimal point.</p>
<a href=“College Board - SAT, AP, College Search and Admission Tools”>College Board - SAT, AP, College Search and Admission Tools;
part d?</p>
I got all right but part II for letter d. I figured if the supply increased, that meant MC increased, since it thought mc=supply for monopoly. I was wrong though, and i was wondering if i maybe got lucky on the other 2.</p>
In addition to Theundertaken’s question, I have a MC question on the audit exam.
<a href=“https://staff.rockwood.k12.mo.us/stewarteric/apecon/Documents/MICRO-Miscellaneous%20Items/Micro%20Practice%20Exam.pdf[/url]”>https://staff.rockwood.k12.mo.us/stewarteric/apecon/Documents/MICRO-Miscellaneous%20Items/Micro%20Practice%20Exam.pdf</a></p>
<h1>8 & 18. I’m not really sure how to approach those. Also could someone clearly explain #13, it’s sort of clear but not crystal.</h1>
Oh mah gawsh!!! Freaking out!!!</p>
Does anyone have any other practice tests? (Such as the 2008 released ones)</p>
Appleandrice, #8 = C because if they do not operate, they lose $20,000. However, if they do operate, they will only lose $10,000. $20,000 = fixed cost, as stated in the problem, so them operating = a loss less than fixed cost.</p>
For #18, -.5 elasticity means it is inelastic (0 = perfectly inelastic, any value between 0 to 1 is inelastic, 1 is unit elastic, and 1-infinity = price elastic, and infinitiy = perfectly elastic)</p>
Therefore, if it’s -.5, it’s inelastic, and -2, elastic. </p>
Inelastic means that the company can charge higher price, and the consumers will buy a a lot more when compared to elastic, so it means that, since consumers are the ones that really want the good, the company can charge them instead of themselves. A good example is cigarettes - government tries to tax them, but the price really falls on the addicted smokers.</p>
Can anyone give me some formulas or a link to them, that will be needed on the test?</p>
MPC/MPS</p>
and all that shnaz?</p>
It would be some great help! :)</p>
Do they give you a formula sheet on the exam?</p>
Does the MPC not matter when the economy is at full employment?</p>
Also, could someone go over the different kinds of taxes? Lump sum and others, and their effects?</p>
Also, socially optimal prices are where P=ATC, efficient is P= min ATC, and Zero profits is P=MC. Right?</p>
That is THE FUNNIEST thing I’ve ever seen on these boards. Thank you for making my day! :)</p>
Also, can someone explain to me how Money Market graphs work? Thanks.</p>
MPC is the Marginal Propensity to Consume. It is used in the formula 1/(1-MPC) to calculate the multiplier effect of government spending, and is always a decimal. </p>
MPS is the Marginal Propensity to Save. MPS = the dS/dY, or the derivative of the savings function with respect to y. You will never have to derive the MPS on an exam though, as it requires calculus. MPS is the opposite of MPC, and measures how much of one dollar a family will save. It is also a decimal number, and is used to calculate the multiplier after tax breaks/hikes.</p>
The Money Market represents how much money there is in the economy. The x axis is the quantity of money in the economy, the y axis is the nominal interest rate, or the “price” of borrowing money. Since the Fed controls the money supply, the supply curve is perfectly vertical. No matter what the interest rate is, no one can change the supply of money, only the fed can do that. If the Fed increases the money supply, the supply curve moves to the right, if it decreases the money supply, it moves to the left. Since the money supply is constant and the supply curve is vertical, an increase in the demand for money will only increase the “price” of money, or nominal interest rate, and not the quantity of money.</p>
What type of question do we have to do MPS and MPC, I need some refreshing 
HELP!? :(</p>
If the country has a MPS of .2, and the government cuts taxes by $10 billion, what is the maximum amount of money that can be introduced into people’s income.</p>
1/0.2 = 5, which is the multiplier. The maximum amount of money introduced into the economy would be $50 billion. However, people will most likely incur a higher MPS if they believe that the tax cut is only temporary. This is a basis for the theory of rational expectations, and also would explain why balanced budget policies result in an increase of Real GDP.</p>
I was giving Robskie an example. Also, you’re answer is incorrect. It’s a tax cut, so it will be 5 times 80% of the tax cut, or $40 billion.</p>
What’s the relationship between household income, price levels, and demand for imports/value of the dollar.</p>