Suppose Suzanne allocates her spending on apples and bananas according to the rational spending rule. If the price of apples is less than the price of bananas, then at Suzanne's optimal consumption bundle, her marginal utility from apples will be:
A. greater than her marginal utility from bananas.
B. equal to zero.
C. less than her marginal utility from bananas.
D. equal to her marginal utility from bananas.
Answer: C
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The interest rate that banks charge one another for the loan of excess reserves is the ________.
A. discount rate B. interest on reserves C. federal funds rate D. prime rate
According to the graph shown, if this economy were to open to trade, which amount of surplus would be transferred?
This graph demonstrates the domestic demand and supply for a good, as well as the world price for that good.
A. Area BC would be transferred to the consumer.
B. Area BCD would be transferred to the producer.
C. Area BCD would be transferred to the consumer.
D. Area BC would be transferred to the producer.
Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The accompanying table describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.Employee-Hours Per DayOutput Per Day0014048091201516023200 This firm's fixed cost each day is:
A. $14. B. $66. C. $50. D. $64.
For years, economists believed that market structure explained the ability of some firms to earn economic profits
For example, firms in industries with little competition and high barriers to entry would earn higher profits than firms in competitive industries with low entry barriers. Which of the following has caused economists to question this explanation and seek other explanations for why firms are profitable? A) In recent years, new technologies have increased the potential entry of new firms in industries with high entry barriers. B) Studies have shown that, on average, firms in competitive industries earn higher profit rates than firms in industries with little competition. C) The market structure explanation fails to explain how firms in the same industry can have very different levels of profit. D) Studies have shown that firms in industries that have little competition and high entry barriers are not very profitable. Economists conclude from this that some competition is necessary in order to force firms to lower their costs and develop products that satisfy new consumer demands.