C211 second OA study guide - Assignment Essays

question

The resource-based view of global business differs from the institution-based view of global business in that the resource-based view _____.

answer

focuses on the internal strengths on the firm

question

The _____ of globalization suggests that globalization is neither recent nor one-directional.

answer

pendulum view

question

Globalization can be viewed as:

answer

A new force sweeping through the world in recent times, or a long-run historical evolution since the dawn of human history, or a pendulum that swings from one extreme to another from time to time.

question

According to the theory of absolute advantage, under free trade:

answer

Each nation gains by specializing in economic activities in which a nation has absolute advantage.

question

Chile requires 50 units of resource to produce one ton of wine and 20 units of resource to produce one ton of blueberries. France requires 30 units of resource to produce one ton of wine and 40 units of resource to produce one ton of blueberries. Which of the following is true?

answer

France has a comparative advantage in wine.

question

Free trade is defined as:

answer

The idea that market forces should determine how much to trade with little or no government intervention.

question

Which of the following is NOT a nontariff trade barrier (NTB)?

answer

Cultural distance

question

Protectionism is similar to mercantilism as they both advocated _____.

answer

government involvement in international trade

question

The _____ principle advocated that governments should actively protect domestic industries from imports and vigorously promote exports.

answer

protectionism

question

The _____ theory is based on the assumption that the wealth of the world is fixed.

answer

mercantilism

question

OLI advantages refer to a firm's quest for _____via FDI.

answer

ownership advantages, location advantages, and internalization advantages

question

Firms prefer FDI to licensing because FDI_____.

answer

provides the firm with direct ownership to its foreign assets.

question

Which of the following is a benefit of FDI to home countries?

answer

Learning from operations

question

Which of the following foreign exchange transactions provide protection to traders and investors from being exposed to fluctuations of the spot rate?

answer

Forward transactions

question

Foreign exchange rates are influenced by:

answer

all of these

question

If an IMF member country were to find itself in a severe balance of payments crisis that threatened its financial stability, the IMF would most likely:

answer

Give the country a loan but require the country to make long-term policy reforms.

question

A home appliance manufacturer located in The Netherlands decides to open two new manufacturing plants, one in Poland and the other in Thailand. Its purpose is to offset currency losses through:

answer

strategic hedging.

question

Risk analysis of any country must include an analysis of the country's:

answer

currency risks.

question

Which of the following is an equity mode of entry?

answer

Wholly owned subsidiaries

question

Which of the following is a disadvantage of licensing and franchising?

answer

Little control over marketing

question

The following are examples of location-specific advantages:

answer

Industry demand that creates a skilled labor force, or Industry demand that facilitates a pool of specialized suppliers and buyers, or knowledge spillovers among closely located firms.

question

Which of type of entry mode is a wholly owned subsidiary?

answer

Equity mode

question

Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be:

answer

a contractual agreement.

question

With regard to foreign market entry, the resource-based view argues that foreign firms need to:

answer

deploy overwhelming resources and capabilities to offset their liability of foreignness.

question

Which of the following sets of words describes the initial set of actions a firm uses to gain competitive advantage and the other firm's response to it?

answer

Attack, counterattack

question

Which of the following is NOT a method used by competitors to signal their intention to reduce competitive intensity to other competitors?

answer

Developing new markets where there is less competition

question

The price leader’s _____ is defined as sufficient resources possessed to deter and combat defection.

answer

capacity to punish

question

The main supportive pillars of the informal institutions are _____.

answer

normative and cognitive

question

The _____ refers to the coercive power of governments.

answer

regulatory pillar

question

In which of the following examples can the role of the cognitive pillar be identified?

answer

A firm being exposed after one of its employees turned whistleblower

question

A fundamental aspect of _____ is that it effectively conducts global business by providing an individual the right to freedom of expression and organization.

answer

democracy

question

Which of the following is true of the common law system?

answer

It has spread to all English-speaking countries and their (former) colonies.

question

_____ refers to a legal system based on religious teachings.

answer

Theocratic law

question

The TRIPS system was designed to _____.

answer

force firms to innovate while strictly adhering to IPR guidelines

question

Which of the following is true of a pure market economy?

answer

All factors of production are privately owned.

question

Which of the following is true of a command economy?

answer

It does not allow private entrepreneurship.

question

For which of the following types of economies would the factors of production depend on the relative distribution of market forces versus command forces?

answer

Mixed economy

question

Which of the following is true of private ownership?

answer

It tends to force firms into liquidation due to high competition.

question

Which of the following is NOT a proposition of the institution-based view of global business?

answer

Informal institutions do not govern firm behavior.

question

Democracy is:

answer

A political system in which citizens elect representatives to govern the country.

question

Which of the following statement is NOT true about market economy?

answer

All factors of production should be government owned and controlled.

question

What are the two core propositions behind the institution-based view of global business?

answer

Managers and firms pursue their interests and make choices rationally in situations; and where formal constraints are unclear or fail, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms.

question

Which economic system is the most common?

answer

A mixed economy

question

Which of the following is NOT a proposition of the institution-based view of global business?

answer

Informal institutions do not govern firm behavior.

question

If marginal cost is rising,

answer

marginal product must be falling.

question

When marginal cost is less than average total cost

answer

average total cost is falling

question

The most likely explanation for economies of scale is

answer

specialization of labor.

question

If a firm uses labor to produce output, the firm's production function depicts the relationship between

answer

the number of workers and the quantity of output.

question

Which of the following represents the firm's short-run condition for shutting down?

answer

Shut down if TR < VC

question

If there is an increase in market demand in a perfectly competitive market, then in the short run

answer

profits will rise

question

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will:

answer

d. fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

question

When firms are said to be price takers, it implies that if a firm raises its price

answer

buyers will go elsewhere

question

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

answer

exactly triple.

question

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

answer

does not change.

question

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

answer

the quantity at which market price is equal to Mr. McDonald's marginal cost of production.

question

Which of the following statements is true?

answer

When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

question

The deadweight loss associated with a monopoly occurs because the monopolist

answer

produces an output level less than the socially optimal level

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

Price discrimination is a rational strategy for a profit-maximizing monopolist when

answer

there is no opportunity for arbitrage across market segments.

question

A monopoly can earn positive profits because it

answer

can maintain a price such that total revenues will exceed total costs

question

A natural monopoly occurs when

answer

there are economies of scale over the relevant range of output.

question

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

answer

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

question

The two types of imperfectly competitive markets are

answer

monopolistic competition and oligopoly

question

A market structure with only a few sellers, each offering similar or identical products, is known as

answer

oligopoly

question

Which of the following statements is correct?

answer

Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.

question

A similarity between monopoly and monopolistic competition is that in both market structures

answer

sellers are price makers rather than price takers.

question

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?

answer

P > MC

question

Which of the following statements is correct?

answer

If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly.

question

In the prisoners' dilemma game, self-interest leads

answer

each prisoner to confess

question

Two suspected drug dealers are stopped by the highway patrol for speeding. The officer searches the car and finds a small bag of marijuana and arrests the two. During the interrogation, each is separately offered the following: "If you confess to dealing drugs and testify against your partner, you will be given immunity and released while your partner will get 10 years in prison. If you both confess, you will each get 5 years." If neither confesses, there is no evidence of drug dealing, and the most they could get is one year each for possession of marijuana. If each suspected drug dealer follows a dominant strategy, what should he/she do?

answer

Confess regardless of the partner's decision

question

The limit on the consumption bundles that a consumer can afford is known as

answer

the budget constraint

question

The slope at any point on an indifference curve is known as

answer

the marginal rate of substitution

question

Which of the following statements is not true with regard to the standard properties of indifference curves?

answer

Indifference curves are bowed outward.

question

The consumer's optimal purchase of any two goods is the point where

answer

the consumer reaches the highest indifference curve subject to remaining on the budget constraint.

question

Equilibrium quantity must decrease when demand

answer

decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

question

If the demand for a product increases, then we would expect equilibrium price

answer

and equilibrium quantity both to increase.

question

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

answer

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

question

Cross-price elasticity of demand measures how

answer

the quantity demanded of one good changes in response to a change in the price of another good.

question

The price elasticity of supply measures how much

answer

the quantity supplied responds to changes in the price of the good.

question

On a graph, consumer surplus is represented by the area

answer

below the demand curve and above price.

question

A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise . As a result, the consumer surplus in the market for red grapes

answer

decreases, and the consumer surplus in the market for red wine decreases.

question

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

answer

consumer does not purchase the good.

question

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

answer

both Janine and Henry experience an increase in consumer surplus.

question

Import quotas and tariffs produce some common results. Which of the following is not one of those common results?

answer

Equal revenue is always raised for the domestic government.

question

If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies, the United States will be

answer

worse off if Colombia doesn't remove the subsidies in response to the threat.

question

What is the fundamental basis for trade among nations?

answer

Comparative advantage

question

A tax on an imported good is called a

answer

tariff

question

In a simple circular-flow diagram, total income and total expenditure are

answer

always equal because every transaction has a buyer and a seller.

question

GDP is defined as the

answer

value of all final goods and services produced within a country in a given period of time

question

Which of the following is included in GDP?

answer

Both the market value of rental housing services and the market value of owner-occupied housing services

question

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

answer

intermediate goods.

question

For the purpose of calculating GDP, investment is spending on

answer

capital equipment, inventories, and structures, including household purchases of new housing.

question

The value of goods added to a firm's inventory in a certain year is treated as

answer

investment, since GDP aims to measure the value of the economy's production that year.

question

Which of the following is not a determinant of the price elasticity of demand for a good?

answer

The steepness or flatness of the supply curve for the good

question

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

answer

the availability of close substitutes in determining the price elasticity of demand.

question

When the Fed decreases the discount rate, banks will

answer

borrow more from the Fed and lend more to the public. The money supply increases

question

Other things the same, if reserve requirements are increased, the reserve ratio

answer

increases, the money multiplier decreases, and the money supply decreases.

question

Which of the following policies can the Fed follow to increase the money supply?

answer

Reduce the interest rate on reserves

question

Which of the following is NOT an example of monetary policy?

answer

The Federal Reserve facilitates bank transactions by clearing checks.

question

When conducting an open-market sale, the Fed

answer

sells government bonds, and in so doing decreases the money supply.

question

Which of the following increase when the Fed makes open market purchases?

answer

Currency and reserves

question

The federal funds rate is the

answer

interest rate at which banks lend reserves to each other overnight.

question

If the Fed raised the reserve requirement, the demand for reserves would

answer

increase, so the federal funds rate would rise.

question

The Federal Reserve

answer

is the central bank of the United States

question

The short-run supply curve for a firm in a perfectly competitive market is

answer

the portion of its marginal cost curve that lies above its average variable cost.

question

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

answer

increase price in the short run but not in the long run.

question

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

answer

fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

question

Which of the following firms is the closest to being a perfectly competitive firm?

answer

A grain farmer in Illinois

question

When new firms enter a perfectly competitive market,

answer

existing firms may see their costs rise if more firms compete for limited resources.

question

Which of the following represents the firm's short-run condition for shutting down?

answer

Shut down if TR < VC

question

A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

Monopoly firms face

answer

downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

question

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

answer

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

question

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

answer

marginal revenue is less than the price of the product.

question

Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing?

answer

Policymakers can regulate prices that the monopoly charges.

question

The deadweight loss associated with a monopoly occurs because the monopolist

answer

produces an output level less than the socially optimal level.

question

The equilibrium quantity in markets characterized by oligopoly is

answer

higher than in monopoly markets and lower than in perfectly competitive markets.

question

Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. What would you expect to happen next?

answer

Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.

question

The equilibrium quantity in markets characterized by oligopoly is

answer

higher than in monopoly markets and lower than in perfectly competitive markets

question

In which of the following markets are strategic interactions among firms most likely to occur?

answer

The market for tennis balls

question

If a certain market were a monopoly, then the monopolist would maximize its profit by producing 4,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude?

answer

One duopolist produces 2,400 units of output and the other produces 1,600 units of output

question

In a prisoners' dilemma game,

answer

if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once.

question

Which of the following statements about oligopolies is not correct?

answer

Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal costs.

question

The resource-based view of global business differs from the institution-based view of global business in that the resource-based view _____.

answer

...

question

Marginal cost is equal to average total cost when

answer

average total cost is at its minimum

question

If a firm produces nothing, which of the following costs will be zero?

answer

Variable cost

question

To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where

answer

MC intersects the demand curve.

question

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

answer

Monopolistic competition features many sellers.

question

In both perfect competition and monopolistic competition, each firm

answer

has many competitors.

question

Which of the following is not a key feature of monopolistic competition?

answer

Positive economic profits for firms in the long run

question

A budget constraint illustrates the

answer

consumption bundles that a consumer can afford.

question

On a graph we draw a consumer's budget constraint, measuring the number of pineapples on the horizontal axis and the number of pencils on the vertical axis. If the slope of the budget constraint is -6, then

answer

a pineapple costs six times as much as a pencil.

question

Indifference curves illustrate

answer

a consumer's preferences.

question

Suppose Jamie can choose between consuming two goods. If we observe that Jamie's budget constraint has moved outward, then we know for certain that

answer

she can reach a higher indifference curve.

question

Suppose William can choose between the consumption of two goods. If we observe that William's budget constraint has moved inward, then we know for certain that

answer

his utility will decrease.

question

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

answer

labor to be variable and capital to be fixed.

question

When new firms enter a perfectly competitive market,

answer

existing firms may see their costs rise if more firms compete for limited resources.

question

Average total cost is very high when a small amount of output is produced because

answer

average fixed cost is high.

1 of 138

question

The resource-based view of global business differs from the institution-based view of global business in that the resource-based view _____.

answer

focuses on the internal strengths on the firm

question

The _____ of globalization suggests that globalization is neither recent nor one-directional.

answer

pendulum view

question

Globalization can be viewed as:

answer

A new force sweeping through the world in recent times, or a long-run historical evolution since the dawn of human history, or a pendulum that swings from one extreme to another from time to time.

question

According to the theory of absolute advantage, under free trade:

answer

Each nation gains by specializing in economic activities in which a nation has absolute advantage.

question

answer

France has a comparative advantage in wine.

question

Free trade is defined as:

answer

The idea that market forces should determine how much to trade with little or no government intervention.

question

Which of the following is NOT a nontariff trade barrier (NTB)?

answer

Cultural distance

question

Protectionism is similar to mercantilism as they both advocated _____.

answer

government involvement in international trade

question

The _____ principle advocated that governments should actively protect domestic industries from imports and vigorously promote exports.

answer

protectionism

question

The _____ theory is based on the assumption that the wealth of the world is fixed.

answer

mercantilism

question

OLI advantages refer to a firm's quest for _____via FDI.

answer

ownership advantages, location advantages, and internalization advantages

question

Firms prefer FDI to licensing because FDI_____.

answer

provides the firm with direct ownership to its foreign assets.

question

Which of the following is a benefit of FDI to home countries?

answer

Learning from operations

question

Which of the following foreign exchange transactions provide protection to traders and investors from being exposed to fluctuations of the spot rate?

answer

Forward transactions

question

Foreign exchange rates are influenced by:

answer

all of these

question

If an IMF member country were to find itself in a severe balance of payments crisis that threatened its financial stability, the IMF would most likely:

answer

Give the country a loan but require the country to make long-term policy reforms.

question

A home appliance manufacturer located in The Netherlands decides to open two new manufacturing plants, one in Poland and the other in Thailand. Its purpose is to offset currency losses through:

answer

strategic hedging.

question

Risk analysis of any country must include an analysis of the country's:

answer

currency risks.

question

Which of the following is an equity mode of entry?

answer

Wholly owned subsidiaries

question

Which of the following is a disadvantage of licensing and franchising?

answer

Little control over marketing

question

The following are examples of location-specific advantages:

answer

Industry demand that creates a skilled labor force, or Industry demand that facilitates a pool of specialized suppliers and buyers, or knowledge spillovers among closely located firms.

question

Which of type of entry mode is a wholly owned subsidiary?

answer

Equity mode

question

Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be:

answer

a contractual agreement.

question

With regard to foreign market entry, the resource-based view argues that foreign firms need to:

answer

deploy overwhelming resources and capabilities to offset their liability of foreignness.

question

Which of the following sets of words describes the initial set of actions a firm uses to gain competitive advantage and the other firm's response to it?

answer

Attack, counterattack

question

Which of the following is NOT a method used by competitors to signal their intention to reduce competitive intensity to other competitors?

answer

Developing new markets where there is less competition

question

The price leader’s _____ is defined as sufficient resources possessed to deter and combat defection.

answer

capacity to punish

question

The main supportive pillars of the informal institutions are _____.

answer

normative and cognitive

question

The _____ refers to the coercive power of governments.

answer

regulatory pillar

question

In which of the following examples can the role of the cognitive pillar be identified?

answer

A firm being exposed after one of its employees turned whistleblower

question

A fundamental aspect of _____ is that it effectively conducts global business by providing an individual the right to freedom of expression and organization.

answer

democracy

question

Which of the following is true of the common law system?

answer

It has spread to all English-speaking countries and their (former) colonies.

question

_____ refers to a legal system based on religious teachings.

answer

Theocratic law

question

The TRIPS system was designed to _____.

answer

force firms to innovate while strictly adhering to IPR guidelines

question

Which of the following is true of a pure market economy?

answer

All factors of production are privately owned.

question

Which of the following is true of a command economy?

answer

It does not allow private entrepreneurship.

question

For which of the following types of economies would the factors of production depend on the relative distribution of market forces versus command forces?

answer

Mixed economy

question

Which of the following is true of private ownership?

answer

It tends to force firms into liquidation due to high competition.

question

Which of the following is NOT a proposition of the institution-based view of global business?

answer

Informal institutions do not govern firm behavior.

question

Democracy is:

answer

A political system in which citizens elect representatives to govern the country.

question

Which of the following statement is NOT true about market economy?

answer

All factors of production should be government owned and controlled.

question

What are the two core propositions behind the institution-based view of global business?

answer

question

Which economic system is the most common?

answer

A mixed economy

question

Which of the following is NOT a proposition of the institution-based view of global business?

answer

Informal institutions do not govern firm behavior.

question

If marginal cost is rising,

answer

marginal product must be falling.

question

When marginal cost is less than average total cost

answer

average total cost is falling

question

The most likely explanation for economies of scale is

answer

specialization of labor.

question

If a firm uses labor to produce output, the firm's production function depicts the relationship between

answer

the number of workers and the quantity of output.

question

Which of the following represents the firm's short-run condition for shutting down?

answer

Shut down if TR < VC

question

If there is an increase in market demand in a perfectly competitive market, then in the short run

answer

profits will rise

question

A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will:

answer

d. fall in the short run. No firms will shut down, but some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

question

When firms are said to be price takers, it implies that if a firm raises its price

answer

buyers will go elsewhere

question

If a firm in a perfectly competitive market triples the quantity of output sold, then total revenue will

answer

exactly triple.

question

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue

answer

does not change.

question

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

answer

the quantity at which market price is equal to Mr. McDonald's marginal cost of production.

question

Which of the following statements is true?

answer

When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

question

The deadweight loss associated with a monopoly occurs because the monopolist

answer

produces an output level less than the socially optimal level

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

Price discrimination is a rational strategy for a profit-maximizing monopolist when

answer

there is no opportunity for arbitrage across market segments.

question

A monopoly can earn positive profits because it

answer

can maintain a price such that total revenues will exceed total costs

question

A natural monopoly occurs when

answer

there are economies of scale over the relevant range of output.

question

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

answer

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

question

The two types of imperfectly competitive markets are

answer

monopolistic competition and oligopoly

question

A market structure with only a few sellers, each offering similar or identical products, is known as

answer

oligopoly

question

Which of the following statements is correct?

answer

Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.

question

A similarity between monopoly and monopolistic competition is that in both market structures

answer

sellers are price makers rather than price takers.

question

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?

answer

P > MC

question

Which of the following statements is correct?

answer

If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly.

question

In the prisoners' dilemma game, self-interest leads

answer

each prisoner to confess

question

answer

Confess regardless of the partner's decision

question

The limit on the consumption bundles that a consumer can afford is known as

answer

the budget constraint

question

The slope at any point on an indifference curve is known as

answer

the marginal rate of substitution

question

Which of the following statements is not true with regard to the standard properties of indifference curves?

answer

Indifference curves are bowed outward.

question

The consumer's optimal purchase of any two goods is the point where

answer

the consumer reaches the highest indifference curve subject to remaining on the budget constraint.

question

Equilibrium quantity must decrease when demand

answer

decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

question

If the demand for a product increases, then we would expect equilibrium price

answer

and equilibrium quantity both to increase.

question

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good?

answer

Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

question

Cross-price elasticity of demand measures how

answer

the quantity demanded of one good changes in response to a change in the price of another good.

question

The price elasticity of supply measures how much

answer

the quantity supplied responds to changes in the price of the good.

question

On a graph, consumer surplus is represented by the area

answer

below the demand curve and above price.

question

A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise . As a result, the consumer surplus in the market for red grapes

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decreases, and the consumer surplus in the market for red wine decreases.

question

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

answer

consumer does not purchase the good.

question

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

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both Janine and Henry experience an increase in consumer surplus.

question

Import quotas and tariffs produce some common results. Which of the following is not one of those common results?

answer

Equal revenue is always raised for the domestic government.

question

If the United States threatens to impose a tariff on Colombian coffee if Colombia does not remove agricultural subsidies, the United States will be

answer

worse off if Colombia doesn't remove the subsidies in response to the threat.

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What is the fundamental basis for trade among nations?

answer

Comparative advantage

question

A tax on an imported good is called a

answer

tariff

question

In a simple circular-flow diagram, total income and total expenditure are

answer

always equal because every transaction has a buyer and a seller.

question

GDP is defined as the

answer

value of all final goods and services produced within a country in a given period of time

question

Which of the following is included in GDP?

answer

Both the market value of rental housing services and the market value of owner-occupied housing services

question

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called

answer

intermediate goods.

question

For the purpose of calculating GDP, investment is spending on

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capital equipment, inventories, and structures, including household purchases of new housing.

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The value of goods added to a firm's inventory in a certain year is treated as

answer

investment, since GDP aims to measure the value of the economy's production that year.

question

Which of the following is not a determinant of the price elasticity of demand for a good?

answer

The steepness or flatness of the supply curve for the good

question

answer

the availability of close substitutes in determining the price elasticity of demand.

question

When the Fed decreases the discount rate, banks will

answer

borrow more from the Fed and lend more to the public. The money supply increases

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Other things the same, if reserve requirements are increased, the reserve ratio

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increases, the money multiplier decreases, and the money supply decreases.

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Which of the following policies can the Fed follow to increase the money supply?

answer

Reduce the interest rate on reserves

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Which of the following is NOT an example of monetary policy?

answer

The Federal Reserve facilitates bank transactions by clearing checks.

question

When conducting an open-market sale, the Fed

answer

sells government bonds, and in so doing decreases the money supply.

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Which of the following increase when the Fed makes open market purchases?

answer

Currency and reserves

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The federal funds rate is the

answer

interest rate at which banks lend reserves to each other overnight.

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If the Fed raised the reserve requirement, the demand for reserves would

answer

increase, so the federal funds rate would rise.

question

The Federal Reserve

answer

is the central bank of the United States

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The short-run supply curve for a firm in a perfectly competitive market is

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the portion of its marginal cost curve that lies above its average variable cost.

question

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increase price in the short run but not in the long run.

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A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will

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fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium.

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Which of the following firms is the closest to being a perfectly competitive firm?

answer

A grain farmer in Illinois

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When new firms enter a perfectly competitive market,

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existing firms may see their costs rise if more firms compete for limited resources.

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Which of the following represents the firm's short-run condition for shutting down?

answer

Shut down if TR < VC

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A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

Monopoly firms face

answer

downward-sloping demand curves, so they can sell only the specific price-quantity combinations that lie on the demand curve.

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The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

answer

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

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If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

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marginal revenue is less than the price of the product.

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Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing?

answer

Policymakers can regulate prices that the monopoly charges.

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The deadweight loss associated with a monopoly occurs because the monopolist

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produces an output level less than the socially optimal level.

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The equilibrium quantity in markets characterized by oligopoly is

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higher than in monopoly markets and lower than in perfectly competitive markets.

question

answer

Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.

question

The equilibrium quantity in markets characterized by oligopoly is

answer

higher than in monopoly markets and lower than in perfectly competitive markets

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In which of the following markets are strategic interactions among firms most likely to occur?

answer

The market for tennis balls

question

answer

One duopolist produces 2,400 units of output and the other produces 1,600 units of output

question

In a prisoners' dilemma game,

answer

if the players play the game repeatedly, the players can achieve a higher payoff, on average, than when they play the game only once.

question

Which of the following statements about oligopolies is not correct?

answer

Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal costs.

question

The resource-based view of global business differs from the institution-based view of global business in that the resource-based view _____.

answer

...

question

Marginal cost is equal to average total cost when

answer

average total cost is at its minimum

question

If a firm produces nothing, which of the following costs will be zero?

answer

Variable cost

question

To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where

answer

MC intersects the demand curve.

question

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

answer

Monopolistic competition features many sellers.

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In both perfect competition and monopolistic competition, each firm

answer

has many competitors.

question

Which of the following is not a key feature of monopolistic competition?

answer

Positive economic profits for firms in the long run

question

A budget constraint illustrates the

answer

consumption bundles that a consumer can afford.

question

answer

a pineapple costs six times as much as a pencil.

question

Indifference curves illustrate

answer

a consumer's preferences.

question

Suppose Jamie can choose between consuming two goods. If we observe that Jamie's budget constraint has moved outward, then we know for certain that

answer

she can reach a higher indifference curve.

question

Suppose William can choose between the consumption of two goods. If we observe that William's budget constraint has moved inward, then we know for certain that

answer

his utility will decrease.

question

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

answer

labor to be variable and capital to be fixed.

question

When new firms enter a perfectly competitive market,

answer

existing firms may see their costs rise if more firms compete for limited resources.

question

Average total cost is very high when a small amount of output is produced because

answer

average fixed cost is high.

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