Question 1: (a) Complete the following table of costs for a firm. (Note: enter the figures in the MC column between outputs of 0 and 1, 1 and 2, 2 and 3, etc.) Output (units) | TC(＄) | AC(＄) | MC(＄) | 0 | 55 | ---- | 30 | 1 | 85 | 85 | | | | | 25 | 2 | 110 | 55 | | | | | 20 | 3 | 130 | 43 | | | | | 30 | 4 | 160 | 40 | | | | | 50 | 5 | 210 | 42 | | | | | 70 | 6 | 280 | 47 | | | | | 90 | 7 | 370 | 53 | | | | | 110 | 8 | 480 | 60 | | | | | 130 | 9 | 610 | 68 | | | | | 150 | 10 | 760 | 76 | | (b) How much is total fixed cost at: (1) an output of 0 units?
The “0 units” total fixed cost is 55.
(2) an output of 6 units?
The “6 units” total fixed …show more content…
A component of Keynesian theory, MPC represents the proportion of an aggregate raise in pay that is spent on the consumption of goods and services, as opposed to being saved.
MPC= △C/△Y (△C is the change in consumption, △Y is the change in disposable income that produced the consumption)
(b) Assume that GDP rises from $550bn to $650bn. Assume that this results in the consumption of goods and services rising from $340bn to $400bn. What is the mpc?
GDP is increase $100bn ($650bn-$550bn=$100bn), the △Y= $100bn
The consumption of goods is increase $60bn ($400bn-$340bn=$60bn), the △C= $60bn
So MPC= △C/△Y= 60/100 = 0.6
(c) Assuming that the mpc remains constant, what will the level of consumption be if GDP rises to $700bn?
MPC remains constant, so MPC is 0.6
GDP rises to $700bn, so △Y= $700bn-$550bn=$150bn
MPC= △C/△Y, so △C= MPC* △Y= 0.6* 150=90
So if GDP rises to $700bn, the level of consumption is $340bn+$90bn=$430bn.
(d) If Australian consumption of goods and services is $400bn, investment is $120bn, government expenditure is $150bn, exports of goods and services are $140bn and imports of goods and services are $145bn, what is the level of aggregate expenditure (E)?
A formula for GDP
GDP= C+I+G+(X-M), C is consumption of goods and services, I is investment, G is government expenditure, X is exports of goods and services, M is imports of goods and