Question : 11) Refer to Figure 16.1. Suppose the economy currently at : 1381232

11) Refer to Figure 16.1. Suppose the economy is currently at Point B. If investors are optimistic about future growth in aggregate output, investment

A) moves to Point C.

B) moves to Point A.

C) moves to Point D.

D) stays at Point B.

12) If a firm is able to produce the same amount of output even after reducing its labor workforce, this implies that the firm has

A) unplanned inventories.

B) excess capital.

C) excess labor.

D) planned inventories.

13) A firm is less likely to invest in new capital if

A) the productivity of capital is high.

B) it has no excess capital.

C) it does not expect future sales to grow.

D) it is expanding into new markets.

14) The unemployment rate does not tend to fall as soon as the economy pulls out of a recession. Which of the following best explains this?

A) Firms are holding excess labor, so as the economy pulls out of the recession, firms do not need to hire new workers immediately.

B) Firms’ optimism about the state of the economy increased prior to the economy pulling out of the recession, so firms increased their employment earlier.

C) Firms are not able to find qualified workers to fill the job vacancies.

D) During recessionary periods, firms switch to more capital-intensive production techniques, so they do not need to increase employment as the economy pulls out of the recession.

15) Which of the following relationships is correct?

A) Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) – Production + Sales

B) Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) – Production – Sales

C) Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) + Production – Sales

D) Stock of Inventories (End of Period) = Stock of Inventories (Beginning of Period) + Production + Sales

16) At the beginning of 2013, the Shades of Gray Company has 8,000 pairs of sunglasses in stock. During 2013, the company produces 120,000 pairs of sunglasses and sells 112,000 pairs of sunglasses. The Shades of Gray Company’s stock of inventory at the end of 2013 is ________ pairs of sunglasses.

A) 0

B) 4,000

C) 8,000

D) 16,000

17) The desired level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is

A) greater than the extra gain (in interest revenue and decreased storage costs).

B) zero.

C) less than the extra gain in (in interest revenue and decreased storage costs).

D) just equal to the extra gain (in interest revenue and decreased storage costs).

18) The Unique Toy Company rents space by the square foot in a warehouse to store its inventory. The owner of the warehouse just doubled the rent he charges the Unique Toy Company. Everything else equal, the rent increase is likely to ________ Unique’s optimal level of inventory.

A) not change

B) increase

C) decrease

D) reduce to zero

19) An unexpected increase in inventories has

A) no effect on future production.

B) a positive effect on future production.

C) a negative effect on current production.

D) a negative effect on future production.

20) If a firm’s sales turn out to be more than expected, inventories will be

A) lower than expected, and there will be more production in the future.

B) lower than expected, and there will be less production in the future.

C) higher than expected, and there will be more production in the future.

D) higher than expected, and there will be less production in the future.