Which of the following statements about the beer industry is correct? A) Over the last 30 years, technological change has resulted in substantial diseconomies of scale in the industry. B) In 2000, the minimum efficient scale in the industry was approximately 18 million barrels per year. C) As a result of an increase in the […]
The opportunity costs of the firm using its own funds are measured by the: A) market interest rate. B) inflation rate. C) price level. D) menu costs. ANSWER A
Taxes levied on a firm’s earnings ________ the effective cost of funds. A) lower B) raise C) have no effect D) none of the above ANSWER B
Which of the following is not cited as one of the factors that accounts for the large-scale production that exists in many sectors of the economy? A) Economies of scale. B) Advertising and image differentiation. C) The minimum efficient scale of operation in many industries is quite high relative to market demand. D) Risk spreading. […]
List and describe the sources of spending in the economy by focusing on the four major sectors of the economy. What will be an ideal response? ANSWER The four major sources of spending in the economy include consumption spending, which is spending by households on durable and non-durable goods and services; gross private domestic […]
Assume a consumer is currently purchasing a combination of goods, X and Y, that maximizes her utility given her budget constraint, i.e., MRSX,Y = PX/PY. Now assume that there is a decrease in the price of Y. In this case, to once again maximize her utility, the consumer will want to adjust her purchases of […]
The capacity utilization rate is the ratio of ________ to ________. A) production; capacity B) capacity; production C) capacity; potential GDP D) none of the above ANSWER A
Many analysts have argued that the federal government should stop spending money on programs such as agricultural price supports and should redirect that spending to such things as improvements in the nation’s roads and bridges. Construct an economic argument that supports this proposed change in policy. ANSWER Government spending on agricultural price supports amounts […]
Assume the price of product A increases from $1 to $1.50, while the price of competing product B increases from $1.50 to $2.00. Based on the information, what we can say about the absolute and relative price differences between the two products and the relative attractiveness of the two products to consumers. ANSWER Clearly, […]
Referring to the previous question, as a result of the consumer’s adjustment to the change in the price of Y, assuming Y is a normal good and X and Y are complements, it is reasonable to expect that the amount of Y consumed will ________, and the amount of X consumed will ________: A) increase; […]
