As interest rates increase, the quantity of loanable funds that are supplied to the loanable funds market
a. increases because people will be attracted by the higher rate of interest
b. decreases because businesses borrow less
c. increases because businesses borrow less
d. decreases because people save less
e. decreases because people will be attracted by the higher rate of interest
A
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Suppose an economy has the following production function: Y = A × K1/4 × H3/4. Which of the following is true of this economy?
A) Production in this economy exhibits increasing returns to scale. B) Production in this economy exhibits decreasing returns to scale C) Production in this economy exhibits constant returns to scale. D) Production in this economy decreases when the price level increase.
If firms in a perfectly competitive industry are making zero economic profit, then
A) some of those firms will leave the industry, because firms cannot persistently go without making economic profit. B) new firms will enter the industry, because the new entrants would be ensured of doing as well as in their best foregone alternative. C) there is no incentive for either entry or exit. D) some of the firms will temporarily shut down.
There are two existing firms in the market for computer chips. Firm A knows how to reduce the production costs for the chip and is considering whether to adopt the innovation or not. Innovation incurs a fixed setup cost of C, while increasing the revenue. However, once the new technology is adopted, another firm, B, can adopt it with a smaller setup cost of C/2. If A innovates and B does not, A earns $20 in revenue while B earns $0. If A innovates and B does likewise, both firms earn $15 in revenue. If neither firm innovates, both earn $5. If C = 15, which is the perfect equilibrium of the game?
A. A innovates, B innovates. B. Neither firm innovates. C. A innovates, B does not. D. None of the answers is correct.
Quick Buck and Pushy Sales produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product.
If Quick Buck and Pushy Sales decide to collude and work together as a monopolist, then together they should produce ________ units per month and charge ________ per unit.
A. 2,000; $2 B. 1,000; $3 C. 4,000; $2 D. 3,000; $1