QUESTION 1: Suppose that a typical firm in a monopolistically competitive industry faces a demand curve given by:
q = 60 - (1/2)p, where q is quantity sold per week.
The firm's marginal cost curve is given by: MC = 60.
- How much will the firm produce in the short run?
- What price will it charge?
In addition to providing the quantitative answers for the question, please also describe the approach you used to arrive at your conclusions.
QUESTION 2: Suppose an economy has 10,000 people who are not working but looking and available for work and 90,000 people who are working. What is its unemployment rate?
Now suppose 4,000 of the people looking for work get discouraged and give up their searches. What happens to the unemployment rate? Would you interpret this as good news for the economy or bad news? Explain in 3 pages.
QUESTION 3: John Maynard Keynes is considered a foundational source in the understanding of macroeconomics. After performing research, please explain in three well-structured paragraphs the basic principles of the New Keynesian Economics and how it addresses perceived limitations to classic Keynesian theory. (PLEASE INCLUDE APA CITATIONS TO SOURCES).