If an industry is characterized by substantial diseconomies of scale, as a particular firm in the industry expands its production capacity we will observe: A) a decrease in marginal costs. B) an increase in the marginal product of labor. C) a decrease in the total fixed costs of production. D) an increase in the average […]
According to the circular flow model, an increase in spending by businesses on productive resources would cause the income and spending of consumers to increase. Indicate whether the statement is true or false ANSWER TRUE
As we move down a linear demand curve, the absolute value of the price elasticity of demand: A) increases. B) stays the same. C) decreases. D) cannot be determined without more information. ANSWER C
Measuring expenditures and income with the price level held constant, so that any changes in these values represent changes in the actual amount of goods, services, and income is denoted in ________ terms. A) nominal B) real C) constant dollar D) all of the above ANSWER B
In which of the following scenarios would a predatory pricing scheme have the greatest chance of success, all else constant? A) The predatory price is set well below cost, many rivals are likely to enter after the strategy ends, and profits can be recouped only over a relatively long period of time. B) The predatory […]
At the point on the demand curve at which marginal revenue = 0, the absolute value of the coefficient of the price elasticity of demand is: A) > 1. B) = 1. C) < 1. D) = 0. ANSWER B
Short-run macroeconomic policies concentrate on: A) minimizing fluctuations around potential GDP. B) maximizing fluctuations around potential GDP. C) incentives for increasing productivity and the potential output of the economy. D) none of the above. ANSWER A
Because it does not face competition from other firms, a monopolist is guaranteed to make excess profits over time. Indicate whether the statement is true or false ANSWER FALSE
Because most gas stations are small relative to the market in which they operate and gasoline is fairly homogeneous, the market for gasoline is considered to be perfectly competitive. Indicate whether the statement is true or false ANSWER FALSE
Marginal revenue equals 0 when: A) total revenue is increasing. B) total revenue is at its maximum. C) total revenue is decreasing. D) none of the above; marginal revenue is always positive. ANSWER B
