Economics Questions - Business 225

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 songdownloaded through iTunes. Why does Apple charge only $0.99 to downloada song?a. Although Apple makes a small amount of profit per song, total profit is largebecause the quantity sold is large.b. The low price makes it more likely that consumers will buy iPods, which arerelatively expensive.c. Apple plans to increase the price of downloading songs after it sells a largeenough number of iPods.d. Apple cannot raise the price above $0.99 per song because consumers candownload songs at even lower prices from Apples competitors.44) You have a bond that pays $60 per year in coupon payments. Which of thefollowing 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. Ifthe price of the stock at that time was $36 per share, which of the followingmust have been true?a. GMs earnings per share was 3.66.b. GMs coupon payment was $35 per year.c. GMs dividend yield for the year was 26%.d. GMs revenues that month were $366 million.46) In 2007, the dividend yield on General Motors (GM) stock fell from 8.6% to4.4%. 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 firms 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 are100 identical firms each producing 5,000 units of output. The prevailingmarket price is $20. Assume that each firm faces increasing marginal cost.Now suppose there is a sudden increase in demand for the industrys productwhich causes the price of the good to rise to $24. Which of the followingdescribes 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 abovenormal profit.b. In the short run the typical firms output remains the same but because of thehigher price its profit increases.c. In the short run the typical firm increases its output but its total cost alsorises. Hence, the effect on the firms profit cannot be determined withoutmore information.d. In the short run the typical firm increases its output but its total cost alsorises, resulting in no change in profit.69) According to Craig Johnson, president of retail consulting group CustomerGrowth Partners Wal-Marts foray into organics should help to bring downprices for consumers. Which of the following statements supports Mr.Johnsons argument?a. Wal-Mart has a reputation for deliberately lowering prices to force itscompetitors 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 scalethat would, when added to a competitive market, drive down prices.d. Wal-Marts core customer base is the low-income consumer. Therefore, tocompete for this customer group organic food farmers will be compelled tolower prices.71) Microsoft thought that the initial Xbox was sufficiently different from PS2that it could charge a significantly higher price for the Xbox than Sony couldcharge for PS2. Which of the following statements is implied by Microsoftsproduct positioning?a. Microsoft recognized that the PS2 was a substitute for the Xbox but believedthat the Microsoft name would be sufficient to draw customers away from thePS2 and that customers would be willing to pay a premium for Microsoftsproduct.b. Microsoft believed that the PS2 would soon be phased out by Sonys PS3;therefore, it could charge a high price for the Xbox because it had no closesubstitutes.c. Microsoft believed that the PS2 was a distant substitute for the Xbox andtherefore the demand curve for Xbox would be elastic. Charging a higher pricewould enable it to increase its profits.d. Microsoft believed that it had differentiated the Xbox sufficiently to insulateit from competition. Consequently, it would be able to charge a higher priceand 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 barriersto entry in perfectly competitive markets.b. monopolistically competitive firms sell differentiated products. Perfectlycompetitive firms sell identical products.c. government regulation restricts the ability of monopolistically competitivefirms to change their prices. Perfectly competitive firms face no price regula-tion.d. the market demand curve in a monopolistically competitive market slopesdownward. The market demand curve in a perfectly competitive market ishorizontal.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 2007Apples share of the growing personal computer market was estimated at 6percent. Which of the following best accounts for this decline in marketshare?a. The entry of rivals eliminated Apples 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 aprice war.98) Why does the short-run aggregate supply curve shift to the left in the longrun, following an increase in aggregate demand?a. Workers and firms adjust their expectations of wages and prices upward andthey push for higher wages and prices.b. Workers and firms adjust their expectations of wages and prices upward andthey accept lower wages and prices.c. Workers and firms adjust their expectations of wages and prices downwardand they accept lower wages and prices.d. Workers and firms adjust their expectations of wages and prices downwardand they push for higher wages and prices.