Economists assume that individuals
behave in unpredictable ways.
will never take actions to help others.
prefer to live in a society that values fairness above all else.
are rational and respond to incentives.
Question 2. Question :
In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called "bandit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've told our detectives they have no interest in ever putting in the barriers."
It would seem that Commerce bank would have a strong incentive to install "bandit barriers" to deter robberies. Why wouldn't they do it?
The banks would rather delay installation of any theft deterring equipment in anticipation of new lower cost innovations in the security devices market.
The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever putting in the barriers".
The banks are concerned that "bandit barriers" would send the wrong message to customers -- that the bank is unsafe.
The banks probably resent any interference from the police department.
Question 3. Question :
Which of the following statements is true about scarcity?
Scarcity refers to the situation in which unlimited wants exceed limited resources.
Scarcity is not a problem for the wealthy.
Scarcity is only a problem when a country has too large a population.
Scarcity arises when there is a wide disparity in income distribution.
Question 4. Question :
The revenue received from the sale of an additional unit of a product
is a marginal benefit to the firm.
is called profit.
is called gross sales.
is called a net gain.
Question 5. Question :
Cassie's Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800
purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt "as is" now for $900. What is the marginal cost of completing the task?
$1,000 plus the value of her time
Question 6. Question :
German auto producer, BMW currently produces two types of automobiles sports utility vehicles (SUVs) and coupes in its US plant. Since it opened in 1994, the company had made and continues to make several strategic production decisions. Figure 2-6 shows changes to its production possibilities frontier in response to some of these production strategies.
Refer to Figure 2-6.
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Point C is
: technically efficient.
unattainable with current resources.
inefficient in that not all resources are being used.
is the equilibrium output combination.
Question 8. Question :
All of the following are examples of spending on factors of production in the circular flow model except
Bima hires two students to work at his ice-cream store.
"Get Fit Together'" purchases 3 new treadmills for its gym.
Iris buys a dozen roses for her mother's birthday.
The Banyan Tree rents a much larger property so that it can add a restaurant to its facilities.
Question 9. Question :
Refer to Figure 2-3. Carlos Vanya grows tomatoes and strawberries on his land. A portion of his land is more suitable for growing tomatoes and the other portion is better suited for strawberry cultivation. Which of the graphs in Figure 2-3 represent his production possibilities frontier?
either Graph A or Graph B
either Graph B or Graph C
Question 10. Question :
An example of a factor of production is
a car produced by an auto manufacturer.
a worker hired by an auto manufacturer.
a loan granted to an auto manufacturer.
the automobiles exported by an auto manufacturer.
All of the following can be used to compute average profit except
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Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54, then to maximize profits the firm should
For a perfectly competitive firm, at profit maximization
How will an increase in the price of land for housing development affect apple growers who must use land to produce apples?
The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because
Economic efficiency requires that a natural monopoly's price be
A monopoly is characterized by all of the following except
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If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then
You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants. Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce. What is likely to happen to your business in the long run?
In the long run, if price is less than average cost,
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In an oligopoly market
The "Discount Department Stores" industry is highly concentrated. What does this mean?
A reason why there is more competition among restaurants than among large discount department stores is that restaurants
A key part of Sam Walton's business strategy for Wal-Mart involved placing stores in small towns where the main competition was from small, locally owned stores. What is the rationale behind this strategy?
According to the marginal productivity theory of income,
Scenario: In academia, professors in some disciplines receive higher salaries than others. For example, professors teaching in business schools receive higher salaries than professors in the English department. Suppose in Unity College, assistant professors in the business school earn $Wbwhile assistant professors in the English department earn $We < Wb. Now suppose the government passes comparable worth legislation that requires academic institutions to pay all faculty the same salaries.Following the passage of comparable worth legislation, Unity College responds by placing salaries at $Wabetween the two existing salaries. Which of the following is the result of the legislation?
Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If, hiring another worker would increase output by three units per hour, then to maximize profits the firm should
Worker discrimination occurs when
The marginal revenue product of capital is
Which of the following is a reason why some firms donot use commission pay?
Which of the following statements about commission systems of compensation is false?
Which of the following is a reason why it is difficult to estimate the extent of economic discrimination in the labor market?
An increase in the supply of capital, which is a complement to labor, will lead to
Gross domestic product understates the total production of final goods and services because of the omission of
Which of the following is not a durable good?
Increases in real GDP wouldoverstatethe increase in the well-being of a country over time if, over that time period, the
The best measure of the income households actually have available to spend is
Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?
Under which of the following circumstances would the government be running a deficit?
What two factors are the keys to determining labor productivity?
The response of firm investment to an increase in the government budget deficit is called
A firm can fund an expansion of its operations by
If consumers decide to be more frugal and save more out of their income, then this will cause