Assume an industry, currently dominated by one firm, experiences a large decline in fixed costs. This will
A) make entry of other firms more likely.
B) make entry of other firms less likely.
C) serve as higher barrier to entry.
D) induce the incumbent firm to exit the industry.
A
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Suppose that a firm can invest $100 today in a project and receive $105 a year from today. There is no inflation, and the annual interest rate in the economy is 4%. The firm should
A) invest in the project because the opportunity cost is the same as the return on the investment. B) invest in the project because the opportunity cost is greater than the return on the investment. C) invest in the project because the opportunity cost is less than the return on the investment. D) not invest in the project because the opportunity cost is less than the return on the investment.
With a temporary income tax surcharge, according to the ________, household consumption should ________
A) PIH; fall as disposable income falls B) PIH; rise since the decrease is disposable income is temporary C) LCH; fall since disposable income over the lifecycle falls D) None of the above is correct since a temporary change affects neither permanent income or relative lifecycle earnings.
The more excess reserves banks choose to keep
A) the larger the deposit multiplier. B) the smaller the deposit multiplier. C) the higher the required reserve ratio. D) the lower the required reserve ratio.
An example of a price ceiling would be the government setting the price of sugar
A. at the equilibrium market price. B. below the equilibrium market price. C. above the equilibrium market price. D. none of the above