Which of the following is not an example of a practice that facilitates “tacit collusion”? A) Uniform prices charged by the firms in a particular industry. B) Advance notice of price changes by one or more of the firms in an industry. C) The use of most-favored-customer clauses. D) The formation of a cartel. […]
If marginal propensity to save equals 0.50, then the marginal propensity to consume is: A) 1.25. B) 0.50. C) 0.70. D) 1.00. ANSWER B
The “marginal rate of substitution” between two goods is measured by: A) the ratio of the market prices of the two goods. B) the number of units of a good consumed divided by the market price of the other good. C) the number of units of one good a consumer would give up to consume […]
“Learning by doing” has the effect of causing: A) a movement down the LRAC curve. B) a movement up the LRAC curve. C) the LRAC curve to shift up. D) the LRAC curve to shift down. ANSWER D
Hot dogs and hot dog buns would be expected to have: A) positive income elasticities of demand with respect to each other. B) negative income elasticities of demand with respect to each other. C) a positive cross-price elasticity of demand. D) a negative cross-price elasticity of demand. ANSWER D
Assume the firms in an oligopoly produce a differentiated product and are initially colluding. If each firm begins to cheat (to increase sales) by underpricing the other firms, as the amount of cheating increases, the resulting industry price and output will approach the outcome for: A) perfect competition. B) monopolistic competition. C) noncooperative monopoly. D) […]
Which of the following would cause a firm’s LRAC curve to shift up? A) An increase in the amount of “learning by doing.” B) An increase in the price of labor, all else constant. C) An increase in the amount of output produced by the firm. D) A decrease in the amount of capital employed […]
The nominal interest rate is 7 percent and the expected inflation rate is 4 percent. The real interest rate is: A) 10 percent. B) -2 percent. C) 3 percent. D) 4 percent. ANSWER C
Because it has a direct effect on the hiring decisions of firms, a change in business confidence has a much larger impact on the level of economic activity than does a change in consumer confidence. Indicate whether the statement is true or false ANSWER FALSE
The “minimum efficient scale” of operation in an industry is defined as: A) the smallest plant size that can be operated by firms in the industry. B) the scale of operation at which economies of scale are exhausted. C) the smallest number of firms that could effectively meet demand for an industry’s output. D) the […]