This Marketing the Connection argues that a key difference between market economies and centrally planned economies, like the former Soviet Union, is that "In market economies, decisions about which investments to make and which technologies to adopt are made by entrepreneurs and managers with their own money on the line. In the Soviet system, these decisions were usually made by salaried bureaucrats trying to fulfill a plan formulated in Moscow." But in large corporations, investment decisions are often made by salaried managers who do not, in fact, have their own money on the line. These managers are spending the money of the firm's shareholders rather than their own money. The investment decisions of salaried managers int he United States tend to be better for the long-term growth of
the economy than were the decisions of salaried bureaucrats in the Soviet Union because:
A. Soviet managers feared losing their jobs if they adopted new technologies
B. U.S. managers are driven by incentives of higher profits, leading them to adopt new technologies
C. U.S. managers face no competition from domestic and foreign firms
D. Soviet bureaucrats concentrated on cutting costs as they faced intense competition from home and abroad
Answer: B. U.S. managers are driven by incentives of higher profits, leading them to adopt new technologies
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Suppose the United States decides to go back on the gold standard. This should
A) improve the Federal Reserve's ability to target inflation. B) decrease the Federal Reserve's ability to pursue active monetary policy. C) increase the effectiveness of expansionary monetary policy. D) increase the effectiveness of contractionary monetary policy.
The above figure shows the market for steel ingots. What is the change in consumer surplus if the market switches from competitive equilibrium to social optimum?
A) $625 B) $1250 C) $1875 D) $2500
In the long run, a monopolistically competitive firm earns small economic profits
a. True b. False Indicate whether the statement is true or false
Which of the following is a characteristic of a competitive market?
a. There are many buyers but few sellers. b. Many firms have market power because they own patents. c. Buyers and sellers are price takers. d. Firms sell differentiated products.