1.In the framework of monopolistic competition, the way advertising works can be perceived as
A) causing both b and c to occur.
2.If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger?
A) the new firm will produce more efficiently and all of the above
3.A drug company is deciding how much to invest in Research and Development into finding a cure for diabetes. The table below shows the company’s demand for financial capital for R&D based on its expected rates of return from selling the cure. Every investment provides an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole.
Estimated Rate of Return_____________________ Value of R&D Projects That Provide at Least This High a Private Rate of Return to the Drug Company (measured in millions of dollars)
10% $220
9% $228
8% $238
7% $250
6% $264
5% $280
4% $298
3% $308
If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest in R&D if it receives only the private benefits of this investment.
A) $250
4.If the quality differences of similar products are mostly imperceptible to the average consumer’s eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?
A) price of competing products
5.In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely
A) raise prices, cut production, and realize positive economic profits.
6.The unemployment rate may underestimate the true extent of unemployment if:
A) many part-time employees would like to work fulltime, but are unable to get the additional work.
7.Nancy’s union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy’s wage increase be expressed in the new contract?
A) COLA plus 2.4%
8.An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?
A) 18.34%
9.Nominal GDP is a reliable indicator of whether a country’s citizens are “better off” over long periods because it fully accounts for both inflation and population growth.
A) False
10.In 1990, the GDP of Canada was $680 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 85 U.S. cents. In 2000, the GDP of Canada was $1000 billion as measured in Canadian dollars, and the exchange rate was that $1 Canadian was worth 69 U.S. cents. By what percentage did the GDP of Canada increase from 1990 to 2000 in Canadian dollars?
A) 47%