Consideration of the minimum efficient scale of operation would suggest that, to minimize production costs, the market should be served by a large number of small firms when the LRAC curve slopes downward over the relevant range of output. Indicate whether the statement is true or false ANSWER FALSE
Date: September 10th, 2020
Assume wages paid by a firm to its workers decrease. What will be the reaction of consumers as the market moves to its new equilibrium? A) Quantity demanded will decrease. B) Quantity demanded will increase. C) The demand curve will shift to the left. D) There will be no reaction by consumers, since input prices […]
Date: September 10th, 2020
The interest rate on Baa corporate bonds is ________, on average, than interest rates on Treasuries, and the spread between these rates became ________ in the 1970s. A) lower; smaller B) lower; larger C) higher; smaller D) higher; larger ANSWER D
Date: September 10th, 2020
Provide a simple definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm’s manager. What will be an ideal response? ANSWER The price elasticity of demand is a measure of the sensitivity of quantity demanded to a change in price. To be […]
Date: September 10th, 2020
According to the kinked demand curve model, if there is a modest increase in a firm’s variable production costs, what is likely to happen to the firm’s profit-maximizing level of output and the amount of profit earned by the firm? Why? What will be an ideal response? ANSWER Given the way the kinked demand […]
Date: September 10th, 2020
Increase in capacity utilization will ________ the expenditure curve: A) decrease. B) increase. C) not change. D) none of the above. ANSWER A
Date: September 10th, 2020
Assume the Congress approves increased drilling for oil in the U.S. to address the current energy shortage. People who are in favor of this policy argue that, ceteris paribus, this would cause: A) an increase in the equilibrium price and quantity of oil. B) a decrease in the equilibrium price and quantity of oil. C) […]
Date: September 10th, 2020
The text considers three methods that can be used to obtain empirical estimates of long-run costs in different industries. Of those three, surveys of expert opinion are considered to be most reliable because they are less subject to bias than the other two methods. Indicate whether the statement is true or false ANSWER FALSE
Date: September 10th, 2020
Assume a consumer purchases two goods: X and Y. All else constant, an increase in the price of X would cause the total utility the consumer can obtain with her available income to decrease. Indicate whether the statement is true or false ANSWER TRUE
Date: September 10th, 2020
Use the information in the following table, which summarizes the payoffs (i.e., profit) to two firms that must decide between an average-quality and a high quality product, to answer the questions that follow: Firm 2 Average Quality High Quality Firm 1 Average Quality 600, 600 400, 1100 High Quality 1100, 400 900, 900 a. What […]
Date: September 10th, 2020
