49) The principal-agent problem is a problem A) caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. B) caused by agents pursuing their own interests rather than the interests of the principals who hired them. C) of the power […]

  10.3   Chapter Figures   A chemical factory dumps waste into a river. The figure above shows the demand curve for the chemical (D) and the marginal private cost (MC) and marginal social cost (MSC) of producing it.   1) In the figure above, the unregulated market equilibrium occurs at a price of ________ a ton and quantity of ________ tons. A) $100; 4,000 B) […]

    Table 17-4 Year Potential Real GDP Real GDP Price Level           2014          $15.1 trillion          $15.1 trillion            150           2015            15.4 trillion            15.3 trillion            153   26) Refer to Table 17-4. Suppose the following table illustrates the values of real and potential GDP and the price level, if the Fed does not vote to change their current policy […]

  11) In order to raise the federal funds rate, the Fed ________ government securities in open market operations, so that banks’ reserves ________ and the quantity of money ________. A) buys; decrease; increases B) sells; decrease; decreases C) sells; increase; decreases D) buys; increase; increases E) buys; increase; decreases 12) In order to lower the federal funds rate, the Fed ________ government securities in […]

  4.1   Consumer Surplus and Producer Surplus 1) The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called A) producer surplus. B) the substitution effect. C) the income effect. D) consumer surplus. 2) In New York City, about 1 million apartments are subject to rent control by the local government. Rent […]

  111) The objective of government regulation and competition policy can be described as a means to A) promote economic efficiency. B) make at least one person better off at the expense of others. C) reduce inequality in the economy. D) increase fairness in economic activities. E) make all industries perfectly competitive. 112) A major aim of Canadian competition policy is to A) eliminate oligopolies […]

    84.A “dealer market” is: a.when buyers and sellers contact each other directly to arrange an exchange of securities. b.a market in which the buyer and seller are not brought together directly but, rather, have their orders executed by securities dealers. c.a market in which buyers and sellers are brought together on a securities exchange to trade securities. d.none of the above     […]

    111.Pratt Company has old inventory on hand that cost $15,000. Its scrap value is $20,000. The inventory could be sold for $50,000 if manufactured further at an additional cost of $15,000. What should Pratt do? a.Sell the inventory for $20,000 scrap value b.Dispose of the inventory to avoid any further decline in value c.Hold the inventory at its $15,000 cost d.Manufacture further and […]

    41) If the government reduces expenditure on goods and services by $30 billion, then aggregate demand A) decreases by more than $30 billion and real GDP decreases. B) decreases by $30 billion and real GDP decreases. C) increases by $30 billion and real GDP increases. D) increases and potential GDP increases. E) increases by more than $30 billion and real GDP increases.   […]

    42.Testor Paints sells varnish with a variable cost of $6.50 per gallon. The company is unsure which price to charge in order to maximize profits. The price charged will also affect the demand.   Gallons Demanded              Unit Price Per Gallon 20,000              $11 30,000              $10 40,000              $9 50,000              $8   If fixed costs are $80,000 and the chart above represents the demand at various […]