work out the TR(no of workers*APP), then MR (differences between TR) and finally MRP of labour. Since it is perfect competition, firms employ up to wage = MRP
q11: essential and most important condition of contestable market is that there are low barriers to entry and exit
q20: export is an injection(J), so fall in X has to be offset by rise in J or fall in leakage(W). Hence A but not D because fall in tax rises disposable income, the full rise is not spend here but only part. the rest is removed hence resulting in a smaller multiplier
dude u explained the wronq questions for 11 & 20 i think ? :O
11)
in perfect compition firms are price takers , if they try to make prices they end up making losses , so price wont change, IF marginal cost > MR it means they are not making profite i.e normal profit , so they reduce quantity back to place where MC=MR (this is also the equilibrum in perfect competion)
20)
ok the Deflationary gap is 4 , which is due to lack of investments,
when investment increases by 4 income rises by 20
4 + increase in consumption = 20
consumption increase = 20-4
then consumtion =16
marginal propensity to consume is the change in consuption to changge in income
change in income = 20
& the consumtion change u got 16
16/20 = 4/5 = 0.8
