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Consider some of the products that are widely advertised on television. How many major products can you think of that are not advertised on TV?
How many real industries can you name that are oligopolies? How many operate under monopolistic competition? Perfect competition?
Explain why in this case consumers must be better off if the firm is permitted to charge discriminatory prices.
General Motors declared bankruptcy in 2009. If it goes out of business altogether, why might that not reduce the competition facing rival automaker Ford?
Discuss why this may be considered socially undesirable. Is this because it is always socially beneficial to produce more of some product?
A firm's marginal revenue is $133 and its marginal cost is $90. What amount of profit does the firm fail to pick up by refusing to increase output by one unit?
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?