In 2013, the dividend yield on Abercrombie & Fitch (ANF) stock rose from a low of
1.33% in May to 2.24% in October. Which of the following would have generated that
result?
A) The closing price of ANF stock rose.
B) ANF announced an increase in the dividend it would pay per share.
C) The price-earnings ratio fell.
D) ANF issued bonds with a coupon rate equal to 2.24%.
Suppose the cross-price elasticity of demand between grapefruit juice and orange juice
is approximately 6. What does this mean?
A) A 1 percent decrease in the price of grapefruit juice leads to a 6 percent increase in
orange juice consumption.
B) A 6 percent increase in the price of grapefruit juice leads to a 1 percent increase in
orange juice consumption.
C) If the price of grapefruit juice rises by $1, 6 more cartons of orange juice will be
purchased.
D) The demand for orange juice is 6 times more than the demand for grapefruit juice.
Figure 3-6
The figure above represents the market for canvas tote bags. Assume that the market
price is $35. Which of the following statements is true?
A) There is a surplus that will cause the price to decrease; quantity demanded will then
increase and quantity supplied will decrease until the price equals $25.
B) There is a surplus that will cause the price to decrease; quantity supplied will then
increase and quantity demanded will decrease until the price equals $25.
C) There will be a surplus that will cause the price to decrease; demand will then
increase and supply will decrease until the price equals $25.
D) There is a surplus that will cause the price to increase; quantity demanded will then
decrease and quantity supplied will increase until the price equals $25.
At a recent faculty meeting, Lorraine Waverly, president of Skywalker College,
announced that enrollment is up by 12 percent over the previous semester. If enrollment
the previous semester was 3,250 students, what is the student enrollment this semester?
A) 390
B) 2,860
C) 3,640
D) 4,030
Table 6-4 The publisher of a magazine gives his staff the following information:
He tells the staff, “Our costs are currently $150,000 more than our revenues each
month. I propose to eliminate this problem by raising the price of the magazine to $3.00
per issue. This will result in our revenue being exactly equal to our cost.” Which of the
following statements is correct?
A) The publisher’s analysis is correct only if the demand is perfectly elastic.
B) The publisher’s analysis is correct only if the demand is elastic.
C) The publisher’s analysis is correct only if the demand is perfectly inelastic.
D) The publisher’s analysis is correct only if the demand is unit-elastic.
Marginal cost is calculated for a particular increase in output by
A) multiplying the total cost by the change in output.
B) multiplying the change in total cost by the change in output.
C) dividing the total cost by the change in output.
D) dividing the change in total cost by the change in output.
If the selling price of a firm’s product is $200 and the estimated average cost of
producing this product is $150, what is the firm’s markup?
A) 75 percent
B) 33.33 percent
C) 25 percent
D) impossible to determine with the information given
Table 14-1 Godrickporter
and Star Connections are the only two airport shuttle and limousine rental service
companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether
to increase its advertising spending to compete for customers. Table 14-1 shows the
payoff matrix for this advertising game. Let’s suppose the game starts with each firm
adhering to its original budget so that Godrickporter earns a profit of $6,000 and Star
Connections earns a profit of $12,000. Is there an incentive for any one firm to increase
its advertising budget?
A) No, neither firm has an incentive to raise its advertising spending.
B) Yes, both firms have an incentive to raise their advertising budgets.
C) Yes, Star Connections has an incentive to increase its advertising budget, but
Godrickporter does not.
D) Yes, Godrickporter has an incentive to increase its advertising budget, but Star
Connections does not.
According to an article in the Wall Street Journal, unlike airlines, even elite hotels don’t
have sophisticated systems that can react quickly to changes in demand. Even if they
could, many hoteliers say people don’t respond that much to lower rates. “We’ve tested
this, cutting our rates by $50 [per night], and we didn’t see an appreciable response in
occupancy,” says Jim Schultenover, a vice president for Ritz-Carlton.
Source: Jesse Drucker, “In Times of Belt-Tightening, We Seek Reasonable Rates,” Wall
Street Journal, April 6, 2001.
Based on the information above, the demand for hotel rooms is
A) elastic.
B) unit-elastic.
C) inelastic.
D) perfectly elastic.
A Herfindahl-Hirschman Index is calculated by
A) summing the amount of sales by the four largest firms and dividing by total industry
sales.
B) dividing the number of firms wanting to merge by the total number in the industry.
C) summing the squares of the market shares of each firm in the industry.
D) summing the advertising expenditures of the firms that want to merge by total
industry advertising expenditures.
Figure 3-4
At a price of $20, how many units will be sold?
A) 400
B) 500
C) 600
D) 800
What is the shape of the labor supply curve implied by the following statements?
a. “I’m sorry, kids, but now that I’m earning more, I just can’t afford to come home early
in the afternoon, so I won’t be here when you get home from school.”
b. “They can pay me a lot or they can pay me a little. I’ll still put in my 8 hours a day.”
c. “Now that I have received a salary increase, I am going to work 36 hours instead of
40 hours a week”
If the MPC is 0.95, then a $10 million increase in disposable income will
A) increase consumption by $200 million.
B) increase consumption by $9.5 million.
C) decrease consumption by $105 million
D) increase consumption by $950 million.
In recent years, a monetary growth rule has fallen out of favor because
A) it is believed that active monetary policy destabilizes the economy and makes the
business cycle worse.
B) the growth rate of GDP has been highly unstable.
C) the close relationship between movements in M1 and movements in real GDP has
become weaker.
D) the growth rate of M1 has become more stable.
If firms differentiate their products in different ways and charge different price because
of these differentiation factors, then
A) the law of one price is not violated.
B) transaction costs are being ignored.
C) the firm must not be maximizing profit.
D) demand must be perfectly elastic.
Based on the following information, what is the balance on the financial account?
Exports of goods and services = $5 billion
Imports of goods and services = $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in the United States = $4 billion
Increase in U.S. holdings of assets in foreign countries = -$1 billion A) $3 billion
B) $2 billion
C) $1 billion
D) -$1 billion