Refer to Scenario 9.10 below to answer the question(s) that follow. SCENARIO 9.10: Investors put up $1,040,000 to construct a building and purchase all equipment for a new cafe. The investors expect to earn a minimum return of 10 percent on their investment. The cafe is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The cafe charges $6 on average per meal.Refer to Scenario 9.10. In the short run, if the cafe shuts down, it will ________ variable costs and ________ revenue.
A. have; receive no
B. have no; receive
C. have; receive
D. have no; receive no
Answer: D
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Refer to the scenario above. Which of the following problems is likely to arise in the market for used cell phones in Barylia?
A) The tragedy of the commons B) The paradox of thrift C) Adverse selection D) Free-rider problem
The flypaper effect is _____
a. that government grants get shifted around to other uses b. that government grants get spent on what they were intended to be spent on c. that government grants are used to lower tax rates d. that government grants are not used by local governments
When negative externalities are present in a market, it means that:
A. social costs are less than external costs. B. private costs are less than social costs. C. private costs are less than external costs. D. external costs are equal to social costs.