Answer the following statement true (T) or false (F)
1) The interest-rate cost-of-funds curve is perfectly elastic because firms can borrow as much or
as little as they want at market interest rates.
2) The interest-rate cost-of-funds curve is perfectly elastic because expected rates of return on
R&D are constant.
3) Large, well-established firms are more likely to use retained earnings to finance R&D, while
small start-up firms are more likely to rely on venture capital.
4) Kara's Kettles, Inc. has developed a new and improved type of cookware. Alex, a typical
consumer, will necessarily purchase Kara's new product if his MU/P for the new cookware
exceeds that of competing products.
5) According to the inverted-U theory of R&D, other things equal, firms in industries with
concentration ratios around 10 percent will be more technologically progressive than firms in
industries with 50 percent concentration ratios.
1) T
2) F
3) T
4) T
5) F
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Refer to Figure 4.5. If all 10 students choose Solid, each student will earn ________ extra points
A) 0 B) 2 C) 4 D) 6
All else equal, if Canada raises its interest rates,
A) the dollar depreciates. B) the U.S. demand for Canadian dollars increases. C) the Canadian supply of Canadian dollars increases. D) Both A and B. E) Both A and C.
If a $10 billion increase in investment leads to a $20 billion increase in GDP, the multiplier is
A) 0.5 B) 2 C) 10 D) 30
Economic analysis suggest that in a competitive market economy, when an entrepreneur has made a large profit,
a. consumer benefits must have been reduced by at least the amount of the profit. b. other producers have lost profits of the same size. c. economic progress for society as a whole has normally been enhanced. d. luck or chance, rather than productive activity, has nearly always been the largest factor.