Expert answer:Economics Questions – Business 225
Answer & Explanation:6) Which of the following statements best characterizes the disagreements be- tween Paul Samuelson and Jagdish Bhagwati in their debate about outsourc- ing?a. Their disagreements are grounded in normative economic analysis. They dis- agree over how to interpret the relevant economic statistics.b. Their disagreements are grounded in positive economic analysis. They dis- agree about the relevant economic statistics used in the model.c. Their disagreements are grounded in normative economic analysis. They dis- agree over the types of jobs lost to outsourcing.d. Their disagreements are grounded in positive economic analysis. They dis- agree about the model and the assumptions used in the model. 22) Although it is a popular product, Apple makes little profit from each song downloaded through iTunes. Why does Apple charge only $0.99 to download a song?a. Although Apple makes a small amount of profit per song, total profit is large because the quantity sold is large.b. The low price makes it more likely that consumers will buy iPods, which are relatively expensive.c. Apple plans to increase the price of downloading songs after it sells a large enough number of iPods.d. Apple cannot raise the price above $0.99 per song because consumers can download songs at even lower prices from Apple’s competitors. 44) You have a bond that pays $60 per year in coupon payments. Which of the following would result in an increase in the price of your bond?a. The price of a share of stock in the company falls.b. The likelihood that the firm issuing your bond will default on debt increases.c. Coupon payments on newly-issued bonds fall to $50 per year.d. Coupon payments on newly-issued bonds rise to $80 per year.45) In June 2007 General Motors (GM) posted a price-earnings ratio of 9.84. If the price of the stock at that time was $36 per share, which of the following must have been true?a. GM’s earnings per share was 3.66.b. GM’s coupon payment was $35 per year.c. GM’s dividend yield for the year was 26%.d. GM’s revenues that month were $366 million.46) In 2007, the dividend yield on General Motors (GM) stock fell from 8.6% to 4.4%. Which of the following would have generated that result?a. The price-earnings ratio rose.b. GM issued bonds with a coupon rate equal to 8%.c. GM announced a decrease in the dividend it would pay per share.d. The closing price of GM stock fell. 63) When a firm’s long-run average cost curve is horizontal for a range of output, then in that range production displaysa. constant average fixed costs.b. increasing returns to scale.c. constant returns to scale.d. decreasing returns to scale.67) A perfectly competitive market is in long-run equilibrium. At present there are 100 identical firms each producing 5,000 units of output. The prevailing market price is $20. Assume that each firm faces increasing marginal cost. Now suppose there is a sudden increase in demand for the industry’s product which causes the price of the good to rise to $24. Which of the following describes the effect of this increase in demand on a typical firm in the indus- try?a. In the short run the typical firm increases its output and makes an above normal profit.b. In the short run the typical firm’s output remains the same but because of the higher price its profit increases.c. In the short run the typical firm increases its output but its total cost also rises. Hence, the effect on the firm’s profit cannot be determined without more information.d. In the short run the typical firm increases its output but its total cost also rises, resulting in no change in profit. 69) According to Craig Johnson, president of retail consulting group Customer Growth Partners “Wal-Mart’s foray into organics should help to bring down prices for consumers.” Which of the following statements supports Mr. Johnson’s argument?a. Wal-Mart has a reputation for deliberately lowering prices to force its competitors out of the market.b. Wal-Mart is large enough that it can successfully pressure the U.S. Department of Agriculture to force organic food farmers to lower their prices.c. By expanding the organic market, Wal-Mart would bring in economies of scale that would, when added to a competitive market, drive down prices.d. Wal-Mart’s core customer base is the low-income consumer. Therefore, to compete for this customer group organic food farmers will be compelled to lower prices.71) Microsoft thought that the initial Xbox was sufficiently different from PS2 that it could charge a significantly higher price for the Xbox than Sony could charge for PS2. Which of the following statements is implied by Microsoft’s product positioning?a. Microsoft recognized that the PS2 was a substitute for the Xbox but believed that the Microsoft name would be sufficient to draw customers away from the PS2 and that customers would be willing to pay a premium for Microsoft’s product.b. Microsoft believed that the PS2 would soon be phased out by Sony’s PS3; therefore, it could charge a high price for the Xbox because it had no close substitutes.c. Microsoft believed that the PS2 was a distant substitute for the Xbox and therefore the demand curve for Xbox would be elastic. Charging a higher price would enable it to increase its profits.d. Microsoft believed that it had differentiated the Xbox sufficiently to insulate it from competition. Consequently, it would be able to charge a higher price and increase its profits.76) A major difference between monopolistic competition and perfect competi- tion is thata. there are barriers to entry in monopolistic competition. There are no barriers to entry in perfectly competitive markets.b. monopolistically competitive firms sell differentiated products. Perfectly competitive firms sell identical products.c. government regulation restricts the ability of monopolistically competitive firms to change their prices. Perfectly competitive firms face no price regula- tion.d. the market demand curve in a monopolistically competitive market slopes downward. The market demand curve in a perfectly competitive market is horizontal. 79) At the peak of its success in the mid-1980s to the early 1990s, Apple Com- puter had a 15 percent share of the personal computer market. In 2007 Apple’s share of the growing personal computer market was estimated at 6 percent. Which of the following best accounts for this decline in market share?a. The entry of rivals eliminated Apple’s product differentiation.b. Apple was not able to keep up with technological advancements in the per- sonal computer market.c. The entry of rivals revealed that Apple was producing sub-standard comput- ers.d. Rivals engaged in predatory pricing but Apple was not willing to engage in a price war. 98) Why does the short-run aggregate supply curve shift to the left in the long run, following an increase in aggregate demand?a. Workers and firms adjust their expectations of wages and prices upward and they push for higher wages and prices.b. Workers and firms adjust their expectations of wages and prices upward and they accept lower wages and prices.c. Workers and firms adjust their expectations of wages and prices downward and they accept lower wages and prices.d. Workers and firms adjust their expectations of wages and prices downward and they push for higher wages and prices.
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