Fred is considering opening a ski shop in Colorado. Assume Fred will incur the following costs: building rent = $100,000/year, inventory = $250,000/year, energy = $50,000/year, and labor (one clerk) = $10,000/year. In addition, Fred’s current income as a computer programmer is $40,000 per year. Assuming Fred would earn $460,000 in revenues, he could expect […]
The price of one good in relation to the price of another good is called: A) absolute prices B) exchange rate C) relative prices D) none of the above ANSWER C
If a bank needs to acquire funds quickly to meet an unexpected deposit outflow, the bank could A) borrow from another bank in the federal funds market. B) buy U.S. Treasury bills. C) increase loans. D) buy corporate bonds. ANSWER A
The present value of an expected future payment ________ as the interest rate increases. A) falls B) rises C) is constant D) is unaffected ANSWER A
In the money market, an excess supply of money is equivalent to an excess supply of bonds. Indicate whether the statement is true or false ANSWER FALSE
Each governor on the Board of Governors can serve A) only one nonrenewable fourteen-year term. B) one full nonrenewable fourteen-year term plus part of another term. C) only one nonrenewable eight-year term. D) one full nonrenewable eight-year term plus part of another term. ANSWER B
All else constant, as the amount of a firm’s implicit costs increases, the difference between economic profit and accounting profit will: A) increase. B) stay the same. C) decrease. D) cannot be determined without more information. ANSWER A
Summarize the characteristics of a perfectly competitive market. What will be an ideal response? ANSWER A perfectly competitive firm produces a product that is identical to that of its competitors, the number of competitors is large and each individual producer is small relative to the market, there is ease of entry into the market, […]
Multinational companies can easily apply identical production methods in different countries and obtain the same results. Indicate whether the statement is true or false ANSWER FALSE
If the yield curve is flat for short maturities and then slopes downward for longer maturities, the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting A) a rise in short-term interest rates in the near future and a decline further out in the future. B) constant short-term […]
