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Which of the following is the best example of an automatic stabilizer.

a. Joe buys fewer apples and more oranges due to an increase in the price of apples.

b. Joe buys more apples when his income increases.

c. Joe buys an apple slicer when the price of apples decreases

d. Joe buys less sugar as a result of an increase in the price of apples  

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manhokwe tawanda
manhokwe tawandaLv10
5 Jan 2021

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Related questions

In this assignment, you will integrate your knowledge from all three weekly outcomes. After reviewing the “From the Expert” video this week, consider the problem of the apple farmer. In your own words, explain the farmer’s optimal solution in the free market using marginal cost analysis. How might this solution be suboptimal from society’s perspective? Explain who benefits and is harmed under the free market solution. Explain who benefits and is harmed under the government subsidy solution? Using economic analysis and the guiding principles of sustainability, justify which solution is best.

SPEAKER 1: Jan owns an apple orchard and it's harvesting season. She has a bumper crop and needs to calculate how many apples she should pick in order to maximize her profits. For thepurposes of this example, she will sell all of her apples to the local cider mill for $0.50 each.

Jan knows that to maximize her profits, she should continue to harvest apples until she reaches the point that the marginal revenue equals the marginal cost. Jan calculates her marginal cost usingthe cost of ladder rentals and the wages of the apple pickers.

The apples on the bottom third of the tree are the cheapest to harvest at a marginal cost of $0.30 per apple. This is because her workers can pluck apples off the bottom of the tree without a ladder.To harvest from the middle of the tree, employees will take more time to pick the apples, which increases the cost of labor. Also, a small ladder is needed. This increases the marginal cost to $0.45.Harvesting from the top of the tree would increase her labor costs per hour, and also requires renting a bigger ladder. This results in $0.55 cents marginal cost.

Since Jan can only get $0.50 for an apple, she will stop picking apples when the marginal cost is greater than the marginal revenue she receives. Thus, she will harvest the apples at the bottom of thetree, and she will make $0.20 per apple. She will also harvest those apples in the middle and make $0.05 per apple. However, she won't harvest the apples at the top, because she would lose $0.05on each one.

With this example, the market economy would theoretically deem it most efficient to just leave the apples high up on the trees to rot. Some people believe that the government should providesubsidies to industries that would leave food and other essential goods to waste. Subsidies, however, cost other resources and create an unfair market.

Should the apples at the top of the tree be left to rot? Or should someone step in and get involved? What do you think should be done?

Real versus nominal GDP

Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities for the goods over a three-year period.

Year

Apples

 

Oranges

 
Price Quantity Price Quantity
(Dollars per apple) (Number of apples) (Dollars per orange) (Number of oranges)
2010 1 120 1 195
2011 2 130 4 195
2012 4 130 4 145

A. Use the information from the previous table to fill in the following table.

Year Nominal GDP Real GDP GDP Deflator
(Dollars) (Base year 2010, Dollars)
2010      
2011      
2012      

 

B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.

 

C. The inflation rate in 2012 was ____________.

 

D. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

a. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.

b. Real GDP includes the value of exports, but nominal GDP does not.

c. Real GDP is not influenced by price changes, but nominal GDP is.

Use the figure below to answer the following question. Price (dollars per apple) 1.50 1.00 9 12 Quantity (thousands of apples per week) Figure 5 21) Which one of the following statements best characterizes point B in Figure 5? A) At point B, the market is in equilibrium. B) The most that consumers would be willing to pay for the 9,000th apple is $0.50. C) At a price of $0.50, there will be an apple shortage. D) Producers would be unwilling to sell the 9,000th apple for less than $0.50. E) At a price of $0.50, consumers will be unwilling to buy any apples.

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