A predatory pricing strategy will have the greatest chance of success when the predatory price is set below the cost of the firm’s competitors, new rivals are unlikely to enter after the strategy ends, and profits can be recouped in a relatively short period of time. Indicate whether the statement is true or false […]
Assume the supply function for good X can be written as Qs = -100 + 27Px – 5Py – 1.8W, where Px = the price of X, Py = the price of good Y, and W = Wage index for workers in industry X. According to this equation: A) X and Y are substitutes in […]
The U.S. dollar appreciates against the euro. What is the impact on aggregate expenditures and income? A) Both increase. B) Both decrease. C) Aggregate expenditure increases and income decreases. D) Aggregate expenditure decreases and income increases. ANSWER B
X-inefficiency refers to the situation in which firms with market power are operating in the upward-sloping segment of their long-run average cost curve. Indicate whether the statement is true or false ANSWER FALSE
Referring to the previous question, all else constant, a 5 unit increase in the wage index would cause: A) quantity supplied to increase by 9 units and be shown by a movement up the supply curve. B) quantity supplied to decrease by 9 units and be shown by a movement down the supply curve. C) […]
Assume the demand function for a particular good can be written as P = 150 – 6Q. When P = 12, the point elasticity of demand equals 2.08. Indicate whether the statement is true or false ANSWER FALSE
The marginal propensity to consume is 0.75, marginal propensity to invest is 0.3, and the marginal propensity to import is 0.2. What is the size of the multiplier? A) 6.67 B) 5.67 C) 4.67 D) 1.67 ANSWER A
Evidence suggests that as the amount of market power possessed by the firms in an industry increases, the amount of X-inefficiency will decrease. Indicate whether the statement is true or false ANSWER FALSE
All else constant, a decrease in the per unit price of labor would create an incentive for a firm manager to substitute labor for capital in the firm’s production process. Indicate whether the statement is true or false ANSWER TRUE
Studies and experience suggest that labor and capital are highly complementary inputs to the production of pipe organs. Indicate whether the statement is true or false ANSWER TRUE