Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not. Why is this so?
A) because unlike Microsoft, the wealthy corn farmer is probably a monopolist
B) because the wealthy corn farmer is a price taker who chooses his optimal output independently of market price but Microsoft's optimal output depends on the price it selects
C) because Microsoft could potentially lose sales if it sets prices indiscriminately
D) because Microsoft is large enough to hire the best people in the field
C
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Suppose the economy is initially at equilibrium, in which total planned real expenditures equals real GDP. Which of the following will occur if there is an increase in autonomous investment?
A) Inventories will decrease immediately and production of goods and services will increase until real GDP catches up with total planned real expenditures. B) Inventories will increase immediately and production of goods and services will decrease until real GDP catches up with total planned real expenditures. C) Inventories will not change and production of goods and services will not change either. D) Both inventories and production of goods and services will increase.
When the Fed ________ the federal funds rate, other short-term interest rates ________ and the exchange rate ________
A) lowers; rise; rises B) raises; fall; rises C) raises; rise; rises D) raises; rise; falls E) lowers; rise; falls
The infant industry argument has a normative economic basis because
A) clearly, all industries need to be protected. B) protected industries are selected on a factual basis. C) the government must decide which industries should be protected. D) political corruption is the only deciding factor.
A monopolistically competitive firm
A. should lower its price if it intends to reduce output. B. sells a fixed amount of output regardless of price. C. can sell an infinite amount of output at the market-determined price. D. should raise its price if it intends to reduce output.