Econ 103 Rustici exam 3

Suppose the bank pays savers 2.5% and charges borrowers 7% who all pay their loans on time and in full. Assume that there is 1.5% administration expenses associated with operating the bank. If the quantity of loan-able funds is $2 million, what are the bank's total profits?

• A. $60,000

• B. $40,000

• C. $80,000

• D. $66,000

Which of the following is *not* true?

• A. Advertising lowers prices and is a form of competition.

• B. The law of diminishing returns is a variable determining where the labor supply curve is located in the x-y space.

• C. The "substitution effect" is a variable determining the slope or elasticity of the labor supply curve.

• D. The "income effect" is a variable determining the slope or elasticity of the labor supply curve.

• E. Advertising is a mechanism for expanding consumer choices.

Suppose workers Sri Lanka earn 12 cents an hour on avg. while workers in the USA earn $15 per hour on average. What is the economic reason for this situation?

• A. US multinational corporation exploit workers in small countries by depressing wages.

• B. Americans earn more because the government protect workers with minimum wage laws and encourages unions

• C. American labor is more productive because our workers are paid more than workers in Sri Lanka

• D. Employers in Sri Lanka are greedy and don't want to pay a living wage

• E. None of the above is correct.

At what quantity would the firm maximize profits?

• A. where total revenue is equal to total cost

• B. where marginal revenue is equal to total revenue

• C. where average variable cost is equal to average revenue

• D. where marginal cost is equal to average fixed costs

• E. none of the above

Which of the following is *not* true with respect to relative price?

• A. The price of the good affects human values relative to scarcity for the good.

• B. The price of the good is determined by all other variables

• C. The prices of other goods affect the relative price of the good

• D. The price of the good can affect the prices of other economic goods

• E. The price of the good affects the quantity supplied and quantity demanded for the good

Which of the following is true?

• A. The single-price monopolist has a marginal revenue curve below the demand curve because it cannot sell additional output without lowering price on previous output.

• B. Perfect price discriminating monopolists restrict output and raise price as compared to the perfect price competition market.

• C. All firms (competitive or monopolistic) set MC=MR to find the quantity of output that maximizes profits.

• D. The market demand curve in the perfect price competition mod

What is *not* true about financial intermediaries?

• A. Financial Intermediaries are institutions that serves as a bridge between the SSUs and DSUs

• B. Financial Intermediaries makes the financial system more efficient.

• C. They reduce the gains from trade.

• D. Financial Intermediaries offers investment advices.

Which economist formulate the "contest-ability hypothesis"?

• A. John Stuart Mill

• C. Joseph Stiglitz

• D. Adam Smith

• D. Friedrich List

• E. William Baumol.

Which of the following is true with respect to Standard Oil Company?

• A. Jonh D. Rockefeller's standard oil company was broken up by the government for behaving as a monopolist

• B. Standard oil had only a few competitors in 1911 when the government broke up the company

• C. Rockefeller was gaining market share from 1890-1911

• D. It was one of the first companies to invest heavily in advertising

• E. None of the above is true.

Which of the following is *not* true concerning cartels in a free market?

• A. Cartel members in the cartel have an incentive to restrict output to raise price.

• B. Cartel members incur policing costs

• C. Cartel members face prisoner's dilemma situation

• D. Cartel members cannot prevent new competition coming from the outside the cartel

• E. Cartel members must prevent all methods of non-price competition