Jamal, Lawson and Kyle have been standing in line for almost an hour waiting to be
served at Kirala, a popular new Japanese restaurant. It is possible that some of the
people in line won’t be served at all before the restaurant closes. Which of the following
could explain why the restaurant does not simply raise prices high enough to eliminate
the lines?
a. In situations where consumption takes place publicly, demand for the product is also
influenced by how many other people are buying the product. Consequently, a popular
restaurant that increased its prices enough to eliminate lines might find that it had also
eliminated its popularity.
b. Firms may sometimes not raise their prices for fear that it violates people’s sense of
fairness and might alienate customers.
c. The demand for restaurant meals is relatively elastic and if the firm raise prices it will
lower its profits.
A) a only
B) a and b only
C) a and c only
D) a, b, and c
How do the owners of a partnership relate to the business?
A) The owners and the business are not separate legal entities.
B) The owners and the business are separate legal entities.
C) The assets of the owners are considered separate from the asset of the business.
D) None of these describe the legal relationship of the owners to the business.
Scenario 1-1
Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and
makes a profit of $5,000 per week. A manager at the plant observes, “Although the last
3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs
by $6,700, we are still making an overall profit of $5,000 per week so I think we’re on
the right track. We are producing the optimal number of cell phones.”
Had the firm not produced and sold the last 3,000 cell phones, would its profit be higher
or lower, and if so by how much?
A) Its profit will be $6,700 higher.
B) Its profit will be $700 higher.
C) Its profit will be $700 lower.
D) Its profit will be $6,000 lower.
In the United States, each bank panic in the late nineteenth and early twentieth centuries
was accompanied by
A) inflation.
B) deflation.
C) a depression.
D) a recession.
The consumer price index implicitly assumes that the demand curve for each good and
service in the representative market basket is
A) positively sloped.
B) negatively sloped.
C) vertical.
D) horizontal.
If the current account is in surplus and the capital account is zero, then
A) the financial account must be in deficit.
B) the balance of trade must be in deficit.
C) the balance of payments must be in deficit.
D) there is a capital inflow.
E) the balance of services must be in deficit.
From 1950 to 2013, the number of people who lived on farms fell from 23 million to
fewer than 3 million. Which of the following factors have contributed to this trend?
A) increases in the cost of farming and a desire for young adults to move to urban areas
B) rapid growth in farm production and low income and price elasticities for food
products
C) slow growth in agricultural productivity and low income elasticities for food
products
D) government policies that have increased the cost of living and working on farms
Figure 12-2
What is the amount of profit if the firm produces Q2units?
A) It is equal to the vertical distance c to g.
B) It is equal to the vertical distance c to Q2.
C) It is equal to the vertical distance g to Q2.
D) It is equal to the vertical distance c to g multiplied by Q2units.
________ occurs when economic benefits are distributed fairly.
A) Productive efficiency
B) Allocative efficiency
C) Equality
D) Equity
Figure 15-3 Figure 15-3 above shows
the demand and cost curves facing a monopolist.
Suppose the monopolist represented in the diagram above produces positive output.
What is the profit-maximizing/loss-minimizing output level?
A) 630 units
B) 800 units
C) 850 units
D) 880 units
Which of the following determines the amount of money the banking system as a whole
can create?
A) the quantity of bank reserves
B) the quantity of vault cash held by banks
C) the gold reserves held by the Federal Reserve
D) the limit on profits by banks imposed by the U.S. Congress
When the price of a financial asset ________ its interest rate will ________.
A) rises; rise
B) falls; fall
C) falls; rise
D) rises; remain the same
When the Fed increases the money supply,
A) the interest rate rises and this stimulates consumption spending.
B) people spend less because they have more money.
C) the interest rate falls and this stimulates investment spending.
D) the interest rate rises and this stimulates investment spending.
Figure 17-3
Which of the following statements is true?
A) Panel B correctly describes a situation in which the income effect dominates the
substitution effect at low wages (segment i) and again at very high wages (segment iii).
B) Panel B incorrectly describes a situation in which the income effect dominates the
substitution effect at low wages (segment i) and a situation in which the substitution
effect dominates the income effect at very high wages (segment iii).
C) Panel B incorrectly describes a situation in which the income effect dominates the
substitution effect at low wages (segment i).
D) Panel B incorrectly describes a situation in which the income effect dominates the
substitution effect at very high wages (segment iii)