Capacity utilization increases. 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 A
Assuming capital and labor are substitutes, an improvement in technology that affects only the productivity of capital would cause a firm to employ more capital but leave the amount of labor employed unchanged. Indicate whether the statement is true or false ANSWER FALSE
Which of the following would not cause the supply curve for gasoline to shift? A) A change in the wages paid to gas station attendants. B) A change in the number of gas stations. C) A change in the incomes of drivers. D) A change in the cost of refining oil. ANSWER C
Assume that the U.S. dollar depreciates against the Japanese yen. 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 A
Assume a firm has decided to undertake a limit pricing strategy. For the strategy to be successful, the firm does not need to actually possess a cost advantage over potential entrants. Rather, the firm simply has to be able to convince potential entrants that it does, in fact, possess an advantage. Indicate whether the statement […]
Studies and recent experience suggest that there is considerable potential for substitution between doctors and nurses in the production of health care services. Indicate whether the statement is true or false ANSWER TRUE
Consider the market for gasoline in a moderately large city. All else constant, it would be reasonable to conclude that the price elasticity demand for any individual gas station would be higher (more elastic) than the price elasticity of demand for gas in general. Indicate whether the statement is true or false ANSWER TRUE
All else held constant, an increase in foreign imports of cameras would cause the supply of cameras in the United States to: A) increase. B) stay the same. C) decrease. D) cannot be determined with the information given. ANSWER A
Assume that in an effort to discourage competitors, firm X has lowered its price below its average total costs of production. This is an illustration of the limit pricing form of strategic entry deterrence. Indicate whether the statement is true or false ANSWER FALSE
Assume the players in a game have reached a Nash equilibrium. It is then reasonable to assume that each player has chosen its dominant strategy. Indicate whether the statement is true or false ANSWER FALSE