The existence of the principal-agent problem
A) increases the risk of buying stock in a corporation.
B) increases the risk of becoming the sole proprietor of a business.
C) implies that managers that have the same incentives as the board of directors.
D) does all of the above.
An increase in the interest rate causes
A) a movement up along the money demand curve.
B) a movement down along the money demand curve.
C) the money demand curve to shift to the left.
D) the money demand curve to shift to the right.
Which of the following is not a characteristic of a perfectly competitive market
structure?
A) There are a very large number of firms that are small compared to the market.
B) All firms sell identical products.
C) There are no restrictions to entry by new firms.
D) There are restrictions on exit of firms.
In 2008, the Treasury and Federal Reserve took several actions in response to the
deepening financial crisis. One action was the creation of the Term Securities Lending
Facility, under which the Fed will loan up to $200 billion of treasury securities in
exchange for
A) stock.
B) mortgage-backed securities.
C) corporate bonds.
D) required bank reserves.
Table 2-11
Table 2-11 shows the number of labor hours required to produce a motorcycle and a
guitar in Ireland and Scotland.
Scotland has a comparative advantage in the production of
A) both products.
B) guitars.
C) motorcycles.
D) neither product.
If a firm’s long-run average total curve shows that it can produce 5,000 DVDs at an
average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) the law of supply.
During the expansion phase of the business cycle, which of the following eventually
increases?
A) production
B) employment
C) income
D) all of the above
Which of the following statements about positive economic analysis is false?
A) Positive analysis uses an economic model to estimate the costs and benefits of
different course of actions.
B) There is much more disagreement among economists over normative economic
analysis than over positive economic analysis.
C) There is much more disagreement among economists over positive economic
analysis than over normative economic analysis.
D) Unlike normative economic analysis, positive economic analysis can be tested.
Of the following high-income countries, which has the lowest number of MRI units per
1 million population?
A) Canada
B) Japan
C) the United Kingdom
D) the United States
Suppose there is some unemployment in the economy and society decides that it wants
more of one good. Which of the following statements is true?
A) It is not possible to achieve this unless technology advances.
B) It can increase output without giving up another good by employing more resources.
C) It will have to increase resource supplies.
D) It will have to give up production and consumption of some other good.
Figure 16-5
Suppose the firm represented in the diagram decides to use a two-part pricing strategy
such that it charges a fixed fee and a per-unit price equal to the competitive price. (This
is also called an optimal two-part tariff.) What is the per-unit price it should charge, if
any?
A) It should not charge a price per unit; just a flat fee to consume as much of the
product as desired.
B) It should charge a range of prices from $40 to $12.
C) $12
D) $16
The actual division of the burden of a tax between buyers and sellers in a market is
called
A) tax incidence.
B) tax liability.
C) tax bearer.
D) tax parity.
Which of the following is an example of market “production,” as used by economist?
A) Garvey takes out a low-cost government loan to start his pet-sitting business.
B) Heidi makes a pizza for her family’s dinner.
C) Katrina works as a cashier at the local produce stand.
D) The theatre and film studies department in Fine Art’s College stages a play at the
local theatre.
A monopolist’s profit maximizing price and output correspond to the point on a graph
A) where average total cost is minimized.
B) where total costs are the smallest relative to price.
C) where marginal revenue equals marginal cost and charging the price on the market
demand curve for that output.
D) where price is as high as possible.
Table 14-4 Alistair Luggage
and Baine Baggage are the only firms selling luggage in the upscale town of Montecito.
Each firm must decide on whether to increase its advertising spending to compete for
customers. If one firm increases its advertising budget but the other does not, then the
firm with the higher advertising budget will increase its profit. Table 14-4 shows the
payoff matrix for this advertising game.
What is the Nash equilibrium in this game?
A) There is no Nash equilibrium.
B) Baine increases its advertising budget, but Alistair does not.
C) Alistair increases its advertising budget, but Baine does not.
D) Both Alistair and Baine increase their advertising budgets.