Assume that firms A and B have the same minimum efficient scale of operation and, at current production levels, both firms are incurring the same average costs of production. However, firm A’s output is 5 times larger than firm B’s output. How is this possible? ANSWER The minimum efficient scale of operation simply refers […]
Assume there is a decrease in the number of substitutes for a good produced by a profit-maximizing price-setting firm. All else constant, this would cause the firm’s ability to markup price above average cost to: A) decrease. B) stay the same. C) increase. D) cannot be determined with the information given. ANSWER C
U.S. export spending is not affected by U.S. real income but is influenced by the economic activity of its major trading partners and the exchange rate, hence export spending is taken as autonomous. Indicate whether the statement is true or false ANSWER TRUE
The difference between the interest income or receipts earned on investments in the rest of the world by the residents of a given country and the payments to foreigners on investments they have made in the given country is called: A) unilateral transfers. B) bilateral transfers. C) net investment income. D) gross investment income. […]
Channeling funds from individuals with surplus funds to those desiring funds when the saver does not purchase the borrower’s security is known as A) barter. B) redistribution. C) financial intermediation. D) taxation. ANSWER C
When demand is elastic, the marginal revenue resulting from a decrease in price is: A) positive. B) zero. C) negative. D) cannot be determined without more information. ANSWER A
Which of the following statements is correct? A) The markup pricing rule that is derived from the rule for profit maximization can be used as a substitute for determining the profit-maximizing level of output by equating marginal revenue and marginal cost. B) It is reasonable to assume that a profit-maximizing firm will never operate in […]
Exports are: A) positively related to the level of foreign income and negatively related to the exchange rate. B) positively related to the level of foreign income and positively related to the exchange rate. C) negatively related to the level of foreign income and negatively related to the exchange rate. D) negatively related to the […]
Capital inflows occur if: A) domestic interest rates are higher than foreign interest rates. B) domestic interest rates are lower than foreign interest rates. C) domestic and foreign interest rates are the same. D) none of the above. ANSWER A
Increased profits provide more internal funds to finance capital investments and a major factor in lenders’ and investors’ decisions to provide external funds to the firm. Indicate whether the statement is true or false ANSWER TRUE
