Which of the following is a TRUE statement relative to retained earnings and investment?
A) Lower interest rates stimulate borrowing for investment, but discourage the use of retained earnings for investment.
B) Lower interest rates reduce the opportunity cost of retained earnings, stimulating the use of these funds in investment.
C) Lower interest rates stimulate borrowing for investment, but have no effect on the use of retained earnings for investment spending.
D) Lower interest rates have no effect on investment spending at all because investment spending is autonomous.
B
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A highly liquid asset
A) generally has a very limited market for its resale. B) has high transaction costs associated with its sale. C) must be held for a substantial period of time. D) can be disposed of easily without loss of value.
Harry and Gus fish the same lake together from the same boat
Each morning Harry typically catches either 20 bluegills or 5 walleyes (depending on how deep he fishes) while Gus typically catches either 20 bluegills or 2 walleyes (depending on how deep he fishes). Other things constant, if they wish to maximize the total number of fish they catch together tomorrow morning, regardless of species, A) Harry should fish and Gus should row. B) Harry should fish only for bluegills and Gus should fish only for walleyes. C) Gus should fish only for bluegills and Harry should fish only for walleyes. D) both Harry and Gus should fish for bluegills.
A firm will shut down in the short run if at the profit-maximizing quantity, ___________
A. total revenue is less than total cost B. marginal revenue is less than average fixed cost C. average total cost exceeds the market price D. marginal revenue is less than average variable cost
(Appendix) In the production function Q = 10L1/2K1/2, calculate the slope of the isoquant when the entrepreneur is producing efficiently with 9 laborers and 16 units of capital. (Hint: The slope of the isoquant = the ratio of the marginal product of labor to the marginal product of capital.)
What will be an ideal response?