If one firm advertises and other firms in the market don't, then ...

[ARLKQ]

If one firm advertises and other firms in the market don't, then ______.
 
  A. the demand for the advertised good becomes more elastic
  B. the profit-maximizing quantity of the advertised good decreases be-cause total fixed costs increase
  C. the average cost of producing a small quantity of the advertised good rises but the average total cost of producing a large quantity might fall
  D. the economic profit made from the advertised good increases

Question 2

Based on the following information, calculate public saving, net foreign investment, and national income. Assume that the capital account is zero and net transfers are zero.
 
  private saving = 145 billion
  exports = 285 billion
  imports = 240 billion
  consumption = 600 billion
  private investment = 125 billion
  government purchases = 75 billion

[aburgess]

Answer to Question 1

D If only one firm advertises, the demand for its good increases, which raises the economic profit the firm can make.

Answer to Question 2

Based on the macroeconomic equation for national income, Y = C + I + G + NX = 600 + 125 + 75 + 45 = 845 billion. Since net exports are 45 billion, net foreign investment must also be 45 billion. According to the saving and investment equation, national saving = domestic investment plus net foreign investment. Based on the numbers provided, domestic investment plus net foreign investment = 125 billion + 45 billion = 170 billion. This 170 billion comes from private and public saving. Since private saving is 145 billion, it must be the case that public saving is 25 billion, so the government is running a budget surplus of 25 billion.