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 […]
The slope of the budget constraint: A) changes as the marginal rate of substitution changes. B) is the ratio of the prices of the two goods. C) is the ratio of the budget to total utility. D) equals one, since the consumer can purchase any combination along the budget constraint. ANSWER B
An index based on a mail survey of 5,000 households by the Conference Board that measures households’ perceptions of general business conditions, available jobs in the households’ local area, and expected personal family income in the coming six months is called the: A) Consumer Sentiment Index. B) Consumer Confidence Index. C) Consumer Satisfaction Index. D) […]
Explain the basic distinction between microeconomic analysis and macroeconomic analysis. Describe the types of issues that each branch of analysis focuses on. What will be an ideal response? ANSWER Microeconomic analysis focuses on the behavior of individuals, e.g., consumers and firms. It is concerned with such issues as how a firm can produce output […]
An indifference curve is negatively-sloped because: A) utility is a subjective concept. B) as the consumer obtains additional units of one good, the consumer is willing to sacrifice increasing amounts of the other good. C) in order to remain at the same level of utility, if an individual gets more of one good, he must […]
Consider two goods, X and Y, where X is measured on the horizontal axis and Y is measured on the vertical axis. All else constant, a decrease in the price of X will cause the consumer’s budget constraint to: A) rotate in along the X axis B) rotate out along the X axis. C) shift […]
Firms have tried a number of different strategies to reduce the negative effects of competition on their ability to earn economic profits. Which of the following strategies is most desirable from the viewpoint of economic efficiency and consumer well being? A) Collusion. B) Price leadership. C) Formation of cartels. D) Investment in research and development. […]
The U.S. Treasury is responsible for controlling the money supply and interest rates in the economy. Indicate whether the statement is true or false ANSWER FALSE
Price leadership: A) has rarely occurred in U.S. history. B) is always illegal in the United States. C) is usually the result of a dominant firm in the industry. D) usually results in the smaller firms in the industry incurring economic losses. ANSWER C
Consider an indifference curve drawn for movies and pizzas. Which of the following statements about this indifference curve is false? A) As an individual consumes more pizzas, the amount of movies the consumer is willing to give up for an additional pizza increases. B) If the individual consumes more pizzas, the amount of movies consumed […]
