Give an example of circular flow for a hypothetical industry. Avoid using an example provided in the text.
What will be an ideal response?
Examples will vary but should show an understanding of how the circular flow
model works for an industry. For example, let’ s say a firm produces pens. Households
spend money to buy these pens. The firm uses this income to pay wages to employees,
rental of office and factory space, and interest. Some of these payments go to
households, who in turn spend some of this money to buy more pens. In this way, a
circular flow of expenditures and payments is established between the firm and
households.
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If a decrease in price decreases a monopolist's total revenue, then
A) demand is elastic. B) demand is inelastic. C) demand is unit elastic. D) the law of demand is violated.
Sue is taking an accounting job she was offered that pays $67,000 per year. She also had two other offers, a sales job paying $71,000 per year and a marketing job paying $65,000 per year. What is Sue's opportunity cost of taking the accounting job?
A) $65,000 B) $67,000 C) $71,000 D) $136,000
What is true of the price elasticity of demand faced by a monopoly firm?
A) Demand is inelastic. B) Demand is more elastic at lower prices and more inelastic at higher prices. C) Demand is perfectly elastic because the monopolist has no competition. D) Demand becomes more elastic as the range of imperfect substitutes expands.
Which of the following represents the general rule of hiring for a firm?
A) Total physical product equals marginal factor cost. B) Average revenue product equals the wage rate. C) Marginal cost equals marginal revenue. D) Marginal revenue product equals marginal factor cost.