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NEW QUESTION # 22
Which goods have a positive cross-price elasticity?
- A. Normal goods
- B. Complements
- C. Shortage goods
- D. Substitutes
Answer: D
Explanation:
InGlobal Economics for Managers,substitute goodshave apositive cross-price elasticity of demand, making option C correct. Cross-price elasticity measures how the quantity demanded of one good responds to a change in the price of another good.
For substitutes, an increase in the price of one good leads consumers to switch to the alternative, increasing demand for the substitute. This positive relationship results in a positive cross-price elasticity. Examples include tea and coffee or butter and margarine.
Complements have negative cross-price elasticity, normal goods relate to income elasticity, and "shortage goods" is not an elasticity classification.
Thus, option C is correct.
NEW QUESTION # 23
In an oligopoly with an initial agreement to maximize total profit, which statements might a firm motivated by self-interest likely make? (Choose THREE.)
- A. "Regardless of what my fellow firms do, I am better off raising production beyond the agreed-to level."
- B. "I am better off reducing output below the agreed level."
- C. "If my fellow firms fail to live up to the agreement and raise production, I am better off raising production myself."
- D. "If my fellow firms live up to the agreement, I am better off raising production."
- E. "I should always cooperate, regardless of outcomes."
Answer: A,C,D
Explanation:
InGlobal Economics for Managers, oligopolies often face aprisoner's dilemma, making deviation from collusive agreements individually rational. Options A, B, and C correctly reflect this logic.
If others cooperate, cheating by increasing output raises individual profit. If others cheat, matching their behavior minimizes losses. Therefore, regardless of others' actions, raising output appears optimal.
Options D and E contradict self-interested incentives.
Thus, A, B, and C correctly capture oligopolistic behavior.
NEW QUESTION # 24
The benefit attributed to firms that enter a market before other firms in the same market segment is best described by which term?
- A. Late-mover advantage
- B. First-mover advantage
- C. Competitive neutrality
- D. Economies of scope
Answer: B
Explanation:
InGlobal Economics for Managers, the benefit enjoyed by firms that enter a marketbefore competitorsis known asfirst-mover advantage, making option C correct. First movers are firms that are pioneers in introducing new products, technologies, or business models into a market.
First-mover advantages can arise from several sources. Early entrants may be able to buildbrand recognition, securecontrol over scarce resources, establishcustomer loyalty, or setindustry standardsthat later entrants must follow. In some cases, first movers can erect significant barriers to entry, making it difficult for competitors to gain market share.
However,Global Economics for Managersalso notes that first-mover advantages are not guaranteed. Early entrants face higher uncertainty, development costs, and the risk of technological obsolescence. Nevertheless, when successful, first movers can sustain long-term competitive advantages.
Option A refers to late-mover advantage, which arises from reduced uncertainty. Option B is not a standard strategic concept. Option D relates to cost efficiencies across products, not timing of entry.
Thus, option C correctly identifies first-mover advantage.
NEW QUESTION # 25
What is true about producer surplus?
- A. It equals total revenue
- B. It measures the well-being of consumers
- C. It is used to measure the well-being of sellers
- D. It measures social welfare
Answer: C
Explanation:
InGlobal Economics for Managers,producer surplusmeasures thewell-being of sellers, making option B correct.
Producer surplus is the difference between the price producers receive and the minimum price they are willing to accept. It reflects profits plus fixed costs and indicates how much sellers benefit from participating in a market.
Options A and D confuse producer surplus with consumer or total surplus. Option C is incorrect because producer surplus is not total revenue.
Therefore, option B is correct.
NEW QUESTION # 26
When supply increases and demand stays the same, what happens to the equilibrium point of price and quantity?
- A. Price increases
- B. Price remains the same
- C. Quantity decreases
- D. Quantity increases
Answer: D
Explanation:
InGlobal Economics for Managers, an increase in supply with demand held constant leads to anew equilibrium characterized by a lower price and a higher quantity, making option A-quantity increases- the correct answer. This outcome follows directly from standard supply-and-demand analysis.
When supply increases, the supply curve shifts to the right. At the original equilibrium price, producers are now willing and able to supply more than consumers wish to buy, creating excess supply. To eliminate this surplus, sellers reduce prices. As prices fall, quantity demanded increases until a new equilibrium is reached where quantity supplied equals quantity demanded.
Although price also changes (it falls), the question asks what happens to theequilibrium point of price and quantity, and among the given options, onlyquantity increasesis correct. Price does not remain the same, nor does it increase, and quantity certainly does not decrease.
This concept is critical for managers analyzing productivity improvements, technological progress, or reductions in input costs. Supply increases are often driven by innovation, economies of scale, or favorable regulatory changes, all of which allow firms to produce more at every price.
Thus, option A correctly describes the equilibrium outcome when supply increases and demand remains unchanged.
NEW QUESTION # 27
Which scenario demonstrates a monopoly created by a resource?
- A. An author copyrights a new book.
- B. A new rare jewel is found, and only one mine in the world has it.
- C. A bridge is so infrequently used that it has a large fixed cost and negligible marginal cost.
- D. A software company copyrights the code for new software.
Answer: B
Explanation:
InGlobal Economics for Managers, aresource-based monopolyarises when a single firm controls aunique, scarce resourcethat cannot be easily replicated or accessed by competitors. Option D correctly illustrates this situation. When only one mine in the world possesses a rare jewel, the firm owning that mine has exclusive control over the supply of that resource, creating monopoly power.
This type of monopoly differs from legal or technological monopolies. The monopoly exists not because of government protection or intellectual property rights, but because ofnatural scarcity. Competitors cannot enter the market without access to the same resource, and alternative sources may be unavailable or prohibitively costly. As a result, the monopolist can restrict output and charge prices above marginal cost.
Option A describes anatural monopolybased on cost structure rather than resource ownership. Options B and C describelegal monopoliescreated by copyright protection, not resource monopolies.
Thus, option D correctly demonstrates a monopoly created by control over a unique resource.
NEW QUESTION # 28
Which statement best summarizes the overall economic effect of tariffs?
- A. They transfer surplus from consumers to producers and the government
- B. They increase total economic surplus
- C. They eliminate inefficiencies in global trade
- D. They benefit consumers more than producers
Answer: A
Explanation:
InGlobal Economics for Managers, tariffs are shown toredistribute economic surplus, making option C correct. When a tariff is imposed, consumers lose surplus due to higher prices, while domestic producers gain surplus and the government collects tariff revenue.
However, the gains to producers and government do not fully offset consumer losses, resulting in deadweight loss. Thus, tariffs reduce total economic welfare even though certain groups benefit.
Options A, B, and D are incorrect.
Therefore, option C accurately summarizes the overall economic effect of tariffs.
NEW QUESTION # 29
When producing a piece of luggage, the marginal cost is $92 and the marginal revenue is $81. What is the best action for the firm?
- A. Decrease production
- B. Restart production
- C. Increase production
- D. Enter the market
Answer: A
Explanation:
According toGlobal Economics for Managers, whenmarginal cost exceeds marginal revenue, firms should decrease production, making option D correct.
In this case, MC = $92 and MR = $81. Producing an additional unit would reduce profit because the cost of production exceeds the revenue gained. Reducing output moves the firm closer to the profit-maximizing condition where MR equals MC.
Options A, B, and C would worsen losses or ignore marginal decision-making principles.
Therefore, option D is the correct managerial response.
NEW QUESTION # 30
What is true about gross domestic product (GDP)?
- A. It places heavier weight on intangible services than tangible goods.
- B. It includes the income of citizens working abroad.
- C. Its year-to-year percentage change represents the inflation rate.
- D. It is thought to be the single best measure of a society's economic well-being.
Answer: D
Explanation:
InGlobal Economics for Managers,gross domestic product (GDP)is widely regarded asthe single best available measure of a society's economic well-being, making option A correct. GDP measures the total market value of all final goods and services produced within a country's borders during a given period.
Although GDP has limitations-it does not account for income distribution, environmental degradation, or non-market activities-it remains the most comprehensive and consistent indicator of economic performance across countries and over time.
Option B is incorrect because inflation is measured by price indices such as the GDP deflator or the consumer price index (CPI), not by GDP growth. Option C is incorrect because GDP values goods and services at market prices without weighting one more heavily than the other. Option D is incorrect because GDP excludes income earned by citizens working abroad; that income is included in gross national income (GNI), not GDP.
Global Economics for Managersemphasizes that GDP is particularly useful for comparing economic output and living standards internationally, especially when adjusted for purchasing power parity.
Thus, option A correctly describes GDP.
NEW QUESTION # 31
What are examples of intellectual property? (Choose TWO.)
- A. A subsidy
- B. A trademark
- C. A patent
- D. A tariff
Answer: B,C
Explanation:
InGlobal Economics for Managers,intellectual property (IP)refers to legally protected creations of the mind.
Patentsandtrademarksare two major forms of IP, making options A and B correct.
Patents protect new inventions, processes, or technologies, granting exclusive rights to inventors for a limited time. Trademarks protect brand identifiers such as names and logos.
Subsidies and tariffs are government policies, not intellectual property protections.
Therefore, options A and B correctly identify examples of intellectual property.
NEW QUESTION # 32
What does the Federal Reserve do to expand aggregate demand? (Choose TWO.)
- A. Increase the money supply
- B. Raise mortgage rates
- C. Reduce the quantity of reserves
- D. Lower the interest rate
- E. Increase the foreign exchange rate
- F. Decrease the money supply
Answer: A,D
Explanation:
InGlobal Economics for Managers, the Federal Reserve expands aggregate demand byincreasing the money supplyandlowering interest rates, making options B and C correct.
Increasing the money supply provides banks with more reserves, encouraging lending. Lower interest rates stimulate borrowing by households and firms, increasing consumption and investment. Both channels raise aggregate demand.
The remaining options contract demand rather than expand it. Therefore, B and C are correct.
NEW QUESTION # 33
What are characteristics of monopolistic competition? (Choose THREE.)
- A. Product differentiation
- B. Free entry and exit
- C. Many sellers
- D. Homogeneous products
- E. One seller
Answer: A,B,C
Explanation:
InGlobal Economics for Managers,monopolistic competitionis characterized bymany sellers,product differentiation, andfree entry and exit, making options A, B, and C correct.
Firms sell products that are similar but not identical, allowing them some degree of pricing power. Examples include restaurants, clothing brands, and personal services. Because entry is relatively easy, economic profits tend to be eliminated in the long run.
Options D and E describe monopoly or perfect competition, not monopolistic competition.
Thus, A, B, and C correctly describe monopolistic competition.
NEW QUESTION # 34
What are characteristics of a market economy? (Choose TWO.)
- A. It found a near ideal in China and the former Soviet Union during communism.
- B. It is characterized by the "invisible hand" of market forces.
- C. Supply, demand, and pricing are planned by the government.
- D. It was first noted by Adam Smith inThe Wealth of Nationsin 1776.
- E. It is defined by a government taking the authoritative role in the economy.
- F. Factors of production are government-owned or state-owned.
Answer: B,D
Explanation:
InGlobal Economics for Managers, amarket economyis characterized by decentralized decision making and reliance on market forces, making optionsB and Ecorrect.
Option B is correct becauseAdam Smith, inThe Wealth of Nations(1776), laid the intellectual foundation for market economies. He argued that individuals pursuing their own self-interest unintentionally promote the overall welfare of society.
Option E correctly identifies the"invisible hand", a central concept in market economies. Prices, supply, and demand coordinate economic activity without centralized planning. Firms decide what to produce based on profitability, and consumers decide what to buy based on preferences and prices.
Options A, C, D, and F describecommand economies, where governments control production, pricing, and resource ownership-characteristics inconsistent with market economies.
Thus, B and E accurately describe defining features of a market economy.
NEW QUESTION # 35
Which statement is true for a monopoly firm, but not for a competitive firm?
- A. The firm is a price taker.
- B. The marginal revenue is less than its price.
- C. The marginal revenue equals the price.
- D. Economic profit is zero in the long run.
Answer: B
Explanation:
InGlobal Economics for Managers, a key distinction between monopolies and perfectly competitive firms is the relationship betweenprice and marginal revenue. For a monopoly,marginal revenue is less than price, making option C correct.
A monopoly faces adownward-sloping demand curve, meaning that to sell an additional unit, the firm must lower the price not only for the marginal unit but also for all previous units sold. As a result, marginal revenue declines faster than price and always lies below the demand curve.
In contrast, a perfectly competitive firm is aprice taker. It can sell as much output as it wants at the market price, so marginal revenue equals price.
Options A and B describe competitive firms, not monopolies. Option D is incorrect because monopolies can earn economic profits in the long run due to entry barriers.
Thus, option C correctly identifies a feature unique to monopoly firms.
NEW QUESTION # 36
Direct exports have which advantage?
- A. Full control over foreign distribution
- B. Lower transportation costs
- C. Capitalization of economies of scale in production in the home country
- D. Elimination of exchange rate risk
Answer: C
Explanation:
InGlobal Economics for Managers,direct exportingallows firms tocapitalize on economies of scale in production in the home country, making option B correct.
By concentrating production domestically, firms can achieve lower average costs, maintain quality control, and leverage existing facilities and expertise. Direct exporting avoids the fixed costs of establishing foreign production facilities.
Options A, C, and D are incorrect because exporting typically involves transportation costs, limited distribution control, and exposure to exchange rate risk.
Thus, option B correctly identifies a key advantage of direct exporting.
NEW QUESTION # 37
In order to increase the money supply, what does the Federal Reserve do?
- A. Buys government bonds from the public
- B. Raises the federal funds rate
- C. Increases reserve requirements
- D. Sells government bonds to the public
Answer: A
Explanation:
InGlobal Economics for Managers, the Federal Reserve increases the money supply primarily throughopen market operations, specifically bybuying government bonds from the public, making option C correct.
When the Fed purchases government securities, it pays banks and other sellers by crediting their reserves.
This action increases the amount of reserves in the banking system, enabling banks to extend more loans. As lending expands, the money supply grows through the money multiplier process.
Option A would decrease the money supply. Option B tightens monetary conditions. Option D reduces banks' ability to lend.
Managers should understand this mechanism because changes in the money supply affect interest rates, investment, exchange rates, and aggregate demand. Therefore, option C accurately describes how the Fed increases the money supply.
NEW QUESTION # 38
What happens when the Federal Reserve increases the money supply?
- A. The aggregate demand curve shifts to the right
- B. The aggregate supply curve shifts to the left
- C. The aggregate supply curve shifts to the right
- D. The aggregate demand curve shifts to the left
Answer: A
NEW QUESTION # 39
What are features shared by monopolies and perfect competition? (Choose TWO.)
- A. Maximum profit occurs when marginal revenue equals marginal cost.
- B. In the long run, it is nearly impossible for new firms to enter.
- C. Firms earn economic profits in the short run.
- D. In the long run, new firms can easily enter the market.
- E. Price is greater than marginal cost.
- F. The structure does not produce the welfare-maximizing level of output.
Answer: A,C
Explanation:
InGlobal Economics for Managers, monopolies and perfectly competitive firms share two important features:
profit maximization at MR = MCand the ability toearn economic profits in the short run, making options E and F correct.
Option E applies universally: all firms maximize profit wheremarginal revenue equals marginal cost, regardless of market structure. This decision rule guides output choices in both monopoly and perfect competition.
Option F is also correct because firms in both structurescan earn economic profits in the short run. In perfect competition, short-run profits attract new entrants, while monopolies may sustain profits longer due to entry barriers.
Options A and B distinguish the two structures. Option C applies only to monopoly. Option D applies only to monopoly, not perfect competition.
Thus, options E and F correctly identify shared features.
NEW QUESTION # 40
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