51) Suppose the Fed buys $1 million of government securities from Bank One, a large commercial bank. Bank One’s reserves ________ and its deposits ________. A) increase by $1 million; do not change B) increase by $1 million; increase by $1 million C) do not change; increase by $1 million D) do not change; do not change E) decrease by $1 million; do not […]

  51. Speedy CouriersSpeedy Couriers documented the miles driven and total vehicle costs for the past five months as follows:    Number of miles Total vehicle costs January 1,600 $3,600 February 2,000   4,600 March 1,500   3,450 April 1,800   3,900 May 2,200   4,500       Refer to the Speedy Couriers information above. Using the high/low method, what is the cost equation to […]

  51. Wintergreen Products allocates overhead based on direct labor hours. During 2011 overhead was overapplied by $4,000. Assuming that the year-end adjustment to clear out the overapplied overhead has not yet been done, which of the following statements is most likely trueif there are no ending inventories?  A. Direct material costs are understated B. Direct labor costs are understated C. Cost of goods sold is overstated D. Net income […]

  31) Along an indifference curve, if the marginal rate of substitution is 3, then the consumer is willing to A) give up 1 unit of the good measured along the y-axis for 3 units of the good measured along the x-axis. B) give up 3 units of the good measured along the y-axis for 1 unit of the good measured along the x-axis. C) […]

    82.Garden Corporation uses cost-plus pricing with a 30% mark-up. The company is currently selling 12,000 units at $21.45 per unit. Each unit has a variable cost of $11.50. In addition, the company incurs $60,000 in fixed costs annually. If demand falls to 10,000 units, how much will the company have to charge per unit in order to earn the same annual profit? A.$22.45 […]

    20) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul’s Parrot pillows, a monopoly producer of pillows stuffed with parrot feathers. When Paul maximizes his profit, Paul produces ________ pillows per hour and if the market was perfectly competitive, ________ pillows per hour would be produced. A) 0; 4,000 B) 3,000; 4,000 C) 4,000; 4,000 D) 3,000; 3,000 […]

      81.A graphical representation of the Agency Cost/Tax Shield Trade-Off Model is shown. Various components of the graph are labeled. Which of the following corresponds to line 1? a.Present value of interest tax shields on debt b.Present value of expected bankruptcy and agency costs c.Value of levered firm with bankruptcy costs d.Value of levered firm in the absence of bankruptcy and agency costs […]

    61) Which of the following statements is a normative statement? A) Inflation has been at an all time low this year. B) The minimum wage should be increased to $8.50 per hour. C) Unemployment this month has increased by less than 0.5 percentage point.. D) Additional spending on education has not produced any rise in test scores. E) Pepsi is less expensive than […]

  3.3  Optimization in Differences: Marginal Analysis 1) Which of the following statements is true? A) Optimization in levels is based on ordinal analysis. B) Optimization in differences is based on marginal analysis. C) Optimization in differences is often faster than optimization in levels as it considers all aspects of the feasible alternatives. D) Optimization in levels is often slower to implement than optimization in […]

  101.Supposethatelementaryeducationcreatesapositiveexternality.Ifthegovernmentdoesnotsubsidizeeducation,then a.theequilibriumquantityofeducationwillbeequaltothesociallyoptimalquantityofeducation. b.theequilibriumquantityofeducationwillbegreaterthanthesociallyoptimalquantityofeducation. c.theequilibriumquantityofeducationwillbelessthanthesociallyoptimalquantityofeducation. d.Thereisnotenoughinformationtoanswerthequestion. 102.Whichofthefollowingisanexampleofapositiveexternality? a.Suenotcatchingtheflubecauseshegotafluvaccine b.MarynotcatchingtheflufromSuebecauseSuegotafluvaccine c.Suecatchingtheflubecauseshedidnotgetafluvaccine d.MarycatchingtheflufromSuebecauseSuedidnotgetafluvaccine 103.Universityresearcherscreateapositiveexternalitybecausewhattheydiscoverintheirresearchlabscaneasilybelearnedbyotherswhohaven’tcontributedtotheresearchcosts.Iftherearenosubsidies,whatistherelationshipbetweentheequilibriumquantityofuniversityresearchandtheoptimalquantityofuniversityresearchproduced? a.Theyareequal. b.Theequilibriumquantityisgreaterthanthesociallyoptimalquantity. c.Theequilibriumquantityislessthanthesociallyoptimalquantity. d.Thereisnotenoughinformationtoanswerthequestion. 104.Flushotsprovideapositiveexternality.Supposethatthemarketforvaccinationsisperfectlycompetitive.Withoutgovernmentinterventioninthevaccinationmarket,whichofthefollowingstatementsiscorrect? a.Atthecurrentoutputlevel,themarginalsocialbenefitexceedsthemarginalprivatebenefit. b.Thecurrentoutputlevelisinefficientlylow. c.Aper-shotsubsidycouldturnaninefficientsituationintoanefficientone. d.Alloftheabovearecorrect. 105.Becausetherearepositiveexternalitiesfromhighereducation, a.privatemarketswillunder-supplycollegeclasses. b.privatemarketswillover-supplycollegeclasses. c.thegovernmentshouldimposeataxoncollegestudents. d.governmentinterventioncannotimprovethemarketforcollegeclasses. 106.Whichofthefollowingistrueofmarketscharacterizedbypositiveexternalities? a.Socialvalueexceedsprivatevalue,andmarketquantityexceedsthesociallyoptimalquantity. b.Socialvalueislessthanprivatevalue,andmarketquantityexceedsthesociallyoptimalquantity. c.Socialvalueexceedsprivatevalue,andmarketquantityislessthanthesociallyoptimalquantity. d.Socialvalueseldomexceedsprivatevalue;therefore,socialquantityislessthanprivatequantity. 107.Inthecaseofatechnologyspillover,internalizingapositiveexternalitywillcausethesupplycurveofanindustryto a.shifttotheright. b.shifttotheleft. c.becomemoreelastic. d.remainunchanged. 108.Whichofthefollowingstatementsisnotcorrect? a.Apatentisawayforthegovernmenttoencouragetheproductionofagoodwithtechnologyspillovers. b.Ataxisawayforthegovernmenttoreducetheproductionofagoodwithanegativeexternality. c.Ataxthataccuratelyreflectssocialcostsproducesthesociallyoptimaloutcome. d.Governmentpoliciescannotimproveuponprivatemarketoutcomes. 109.Technologyspilloverisonetypeof a.negativeexternality. b.positiveexternality. c.subsidy. d.producersurplus. 110.Whichofthefollowingbestdefinesthesituationwhereonefirm’sresearchyieldsknowledgethatisusedbysocietyasawhole? a.socialcost b.opportunitycostoftechnology c.internalizationofanexternality d.technologyspillover