The fact that supermarkets, a land-intensive form of organization, have become the dominant form of grocery store in the United States suggests that: A) there is little or no potential for input substitution in the grocery store business. B) transportation costs are insignificant in the grocery store business. C) land is a relatively inexpensive input […]
Which of the following is least likely to limit the ability of a firm to minimize production costs? A) Resistance by labor. B) The fact that the firm is a nonprofit organization. C) An increase in the amount of competition faced by the firm. D) Legislated input combinations for firms in particular industries, e.g, health […]
The following question is an example of microeconomic analysis, “What determines the price of gasoline in a particular city or town?” Indicate whether the statement is true or false ANSWER TRUE
According to the text there appear to be very limited opportunities for input substitution in the production of pipe organs. Which of the following is the most plausible explanation for this observation? A) Capital costs have made it too expensive to purchase more capital stock. B) It requires a large amount of highly trained labor […]
Assume the firms firms operating in an oligopolistic market experience a relatively small change in marginal costs. According to the kinked demand curve model this would: A) cause a large change in the profit-maximizing level of output. B) leave the equilibrium price unchanged. C) cause the profit-maximizing level of output to change by the same […]
Changes in the macroeconomy, such as an increase in average per person income, can have effects at the microeconomic level, for example, on the profitability of firms in a particular industry. Indicate whether the statement is true or false ANSWER TRUE
As the percentage of the consumer’s income accounted for by a particular good decreases, demand for the good will: A) tend to become more price elastic. B) tend to become more price inelastic. C) tend to become closer to unit elastic. D) tend toward being perfectly elastic. ANSWER B
The evidence on the potential for input substitution in the service sector suggests that: A) there may be more opportunities for input substitution than was previously thought, especially in areas such as health care, financial services, and the even the fine arts. B) the traditional view that the potential for input substitution is extremely limited […]
Which of the following is cited as a problem with the kinked demand curve model? A) It assumes that firms do not attempt to maximize profits. B) It assumes that firms determine the profit-maximizing level of output by equating marginal cost and average variable cost. C) It does not explain how the equilibrium market price […]
If the consumer has a great deal of time to adjust to an increase in the price of gasoline, which of the following is correct? A) Quantity demanded will be relatively sensitive to the change in price. B) The percentage change in quantity demanded will be quite small relative to the percentage change in price. […]
