Assume an individual is considering opening a new car dealership in a medium-sized metropolitan area (population = 200,000 ). Provide a list of economic variables you would recommend that the person consider in making his decision whether to open the business, and explain your rationale for including each variable. ANSWER At a minimum, it […]
The total amount of spending on nonresidential structures, equipment, software, residential structures, and business inventories in a given period of time is called: A) net exports. B) government consumption and investment. C) gross private domestic investment. D) personal consumption. ANSWER C
Assume firm X is one of the three largest firms in an oligopolistic industry. Firm X is currently considering a vertical merger with another firm that is the sole supplier of an input used by all of the firms that compete with firm X. If the merger goes through, firm X would be able to […]
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 […]
Greater consumer confidence, wealth, available consumer credit, and disposable income ________ personal consumption expenditures. A) increase B) decrease C) have no effect on D) none of the above ANSWER A
As we move down a particular indifference curve, if the “marginal rate of substitution” between the two goods does not change we can conclude that the two goods are: A) perfect substitutes. B) perfect complements. C) totally unrelated. D) both inferior goods. ANSWER A
The use of surveys of experts to estimate long-run production costs may be undermined by the fact that: A) it is a time-consuming process. B) it is dependent on the judgments of individuals closely connected with the industry. C) reporting biases can occur. D) all of the above. ANSWER D
All else constant, if the central bank wants to slow the pace at which the economy is expanding, it should increase interest rates. Indicate whether the statement is true or false ANSWER TRUE
It has been observed that whenever one imported beer distributor raises its price, other imported beer distributors quickly raise their price as well. Such behavior is characteristic of: A) the barometric-firm model of price leadership. B) explicit collusion. C) price leadership. D) the kinked-demand curve model of oligopoly. ANSWER C
In which of the following situations would the minimum efficient scale of operation provide little or no guidance regarding how many firms should serve the market to minimize production costs? A) When the LRAC curve slopes downward over the relevant range of output. B) When the LRAC curve hits its minimum point at a relatively […]
