Economics Homework Thirteen Answers - Student Five

Economics Chapter 13[edit]

Leonard G

1.) The answer is C.

Nope. AFC=FC/Q, so as Q (which is output) increases, AFC decreases. Correct answer is (b): "(b) as output increases, AFC decreases." (Minus 2).

3.) The primary responsibility for the Federal Reserve Bank is to protect the United States’s bank system from collapsing by managing the whole system.

Correct.

4.) The good must be elastic if I am able to increase my revenue along with the good’s price.

Correct reason, but wrong conclusion. Inelastic demand is when revenue increases along with the good's price, as in the example of addictive goods. When the price increases for them, the addicted users still buy them and the profits increase for the seller. When a good has elastic price, then demand falls sharply as the price increases (like the easy stretching of a rubber band), and revenue falls much also. (Minus 1).

5.) A monopolistic competitive firm has a good that sells at a price that is higher than marginal cost to maximize profits , making it different from a perfectly competitive firm which has a good that sells at a price as close as possible to marginal cost to maximize profits. So the answer is C.

Correct!

6.) Planning in the long run usually will save you money, while last minute purchases (the short run) will usually make you waste money. This occurs with airfare, because as the date of the flight comes closer, more people have purchased airfare for that flight, therefore decreasing the supply which in turn increases the price of the ticket.

Excellent!

7.) One aspect of monopolistic competition I believe some people do not understand is that there are almost no barriers of entry. A new firm can easily enter the market if their product that can partially substitute another companies product.

Superb!

Strong finish, but the instructions this time said to answer only 5 out of 7. Be sure always to follow instructions. I'll drop your weakest answer so your score is 49/50. Well done!--Andy Schlafly 21:27, 19 December 2009 (EST)