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Draw an average and marginal cost curve for the firm in Test Yourself Question 1 above. Describe the relationship between the two curves.
Suppose that in economy described in Test Yourself 1 interest rates suddenly fall to 3 percent. What will happen to the price of the bond that pays $3 per year?
For whom are stocks riskier than bonds? For whom are bonds riskier than stocks?
If you want to buy a stock, when might it pay you to use a market order? When will it pay to use a limit order?
Crestline Bank would like to minimize its labor costs by hiring as few tellers as possible while still maintaining a stated service level.
Do you think the courts are right to reject coercive offers and prevent management from blocking noncoercive offers? Why?
Critics claim that this practice is a major reason why stock prices rose and fell sharply in the 1980s. Is this idea plausible? Why or why not?
Explain why it is not sensible to close a business firm if it earns zero economic profits.
Explain why a perfectly competitive firm does not expand its sale without limit if its horizontal demand curve indicates that it can sell as much as it desires.
Which is primarily responsible for the fact that the demand curve of a perfectly competitive firm is horizontal?
If you were president of your college, what would you change if your budget were cut by 10 percent? By 25 percent? By 50 percent?
Draw Jasmine's production possibilities frontier if she has $280 budgeted to spend on the purchase of potato chips from the wholesaler.
Which case will lead to a more generous production possibilities frontier for Stromboli in 2009?
Is buying the house a good deal for the tenant? Where does opportunity cost enter the picture?
Most American businesses are small, but most of the output is produced by large businesses. What is the role of government in a mixed economy?
Which are the two biggest national economies on earth? Why are they so much bigger than the others?
Suppose that strawberries sell for $3 per basket. Jim is considering to buy zero, one, two, three, or four baskets. Calculate how many baskets Jim would buy.
If the farm is now privately owned, how does the market guide the decisions that used to be made by the central planning agency?
Describe the trade-offs that were involved. What were the opportunity costs of the decisions that were actually made?
What shapes would you expect for demand curves for the following: A medicine that means life or death for a patient.
Would you do so more often if a rental cost half as much? Discuss the likely effects of the following: Rent ceilings on the market for apartments.
Use two diagrams, one for the milk market and one for the meat market, to illustrate how this policy should have affected the price of meat.
The same rightward shift of the demand curve may produce a very small or a very large increase in quantity. Explain this conclusion with diagrams.
In 1981, when regulations were holding the price of natural gas below its free-market level. Evaluate the congressman's statement.
From 1990 to 1997 in the United States, number of working men grew by 6.7 percent. Which of the following two explanations seems more consistent with the data?