Answer the following statements true (T) or false (F)
1) If competitive firms spent money on advertising their product, their profits would decrease.
2) The profit-maximizing quantity and price is determined after the optimal amount of advertising is determined.
3) To maximize profits, managers should purchase the quantity of advertising that maximizes gross profit.
4) If a firm only has one advertising medium, it maximizes its profit by first setting the marginal benefit from its product equal to its marginal cost of production and then determining the optimal amount to advertise.
5) It is possible for firms to not maximize profits even if they have optimally allocated their fixed advertising budget.
1) TRUE
2) TRUE
3) FALSE
4) FALSE
5) TRUE
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Assume the LRAC curve for a particular industry hits its minimum point at a relatively low level of output and then increases, and the demand for industry output is quite large
In this case, consideration of the minimum efficient scale of operation suggest that the market should be served by: A) a large number of small firms to minimize production costs. B) a small number of large firms to minimize production costs C) a large number of large firms to minimize production costs. D) an indeterminate number of firms of indeterminate size to minimize production costs.
Assume a required reserve ratio of .25 and a discount rate of .05. If excess reserves rise by $20, demand deposits can expand by a maximum of
A) $20. B) $25. C) $80. D) $100.
Weak instruments are a problem because
A) the TSLS estimator may not be normally distributed, even in large samples. B) they result in the instruments not being exogenous. C) the TSLS estimator cannot be computed. D) you cannot predict the endogenous variables any longer in the first stage.
The provision of additional cash to the banking system is an example of ________ policy.
A. fiscal B. structural C. aggregation D. monetary