Assume a firm produces 500 units of a good by using two inputs, capital and labor, whose per unit prices are $10 and $4. Assume also that the marginal physical product of the last unit of capital is 30 and the marginal physical product of the last unit of labor is 10. Is this firm […]
According to the kinked demand curve model, regardless of whether a firm increases or decreases price, its total revenues will decrease as a result of the price change. Indicate whether the statement is true or false ANSWER TRUE
Assuming the demand curve in question is downward sloping, the calculated price elasticity of demand will always be negative. Indicate whether the statement is true or false ANSWER TRUE
All else constant, all of the following would cause the demand curve for a good to shift except: A) a change in the cost of producing the good. B) a change in the price of a related good. C) a change in consumer’s incomes. D) a change in the number of buyers. ANSWER A
A major weakness of the kinked demand curve model is that it does not explain how the equilibrium price, i.e., the price at the kink in the demand curve, is determined. Indicate whether the statement is true or false ANSWER TRUE
The aggregate expenditure in an open economy is defined as: A) E = C + I + G. B) E = C + I + G + X. C) E = C × I × G × X – M. D) E = C + I + G + X – M. ANSWER D
The total revenue from the sale of a good or service is calculated by multiplying the price paid by the number of units sold. Indicate whether the statement is true or false ANSWER TRUE
Higher expected profits and business confidence ________ investment spending. A) decrease B) increase C) do not affect D) none of the above. ANSWER B
Appreciation of the U.S. dollar will ________ exports and ________ imports, other things equal. A) increase; increase B) increase; decrease C) decrease; decrease D) decrease; increase ANSWER D
A movement down along a given isoquant causes the marginal rate of technical substitution to: A) increase. B) stay the same. C) decrease. D) cannot be determined without additional information. ANSWER C