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Suppose the bank pays savers 4% and charges borrowers 7%. Assume that there are 1% administration expenses associated with operating the bank. If the quantity of loanable funds is $2 million, what are the bank's total profits?
$40,000
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Which of the following is true?
Advertising lowers search costs for consumers
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Suppose workers in Sri Lanka earn 12 cents per hour on average while workers in the USA earn $15 per hour on average. What is the an economic reason for this situation?
Sri Lankan workers are less productive than American workers.
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If an economic good has a price elasticity coefficient of +.75, we can infer:
NONE OF THE ABOVE
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The "Law of Supply" states:
An inverse relationship exists between the relative price of the good and the quantity supplied
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Which of the following is true?
When a monopoly firm sets price equal to marginal cost, no dead-weight loss is created
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Which of the following is not true concerning cartels in a free market?
Cartel members have an incentive to expand output to lower price.
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Suppose ACME Corporation earns a bottom line profit of $1 million last year. Suppose the general rate of return on investments is 5%. If ACME is leaving the industry we can infer:
The investor equity in ACME is more than $20 million
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What is true about financial intermediaries?
They have a comparative advantage in the production of free information.
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Suppose the inflation rate in the USA is 6%. On day two, the inflation rate in Britain decreases to 3% while it remains at 6% in the USA. Before the exchange rate adjusts, what will occur?
A surplus of dollars in Britain relative to Pounds
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Which of the following is not true with the respect to relative price?
The price of the good reflects human values relative to scarcity for the good
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Which of the following is true?
In the perfect price competition model the marginal revenue curve is below the demand curve.
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Which of the following is true?
The trade-off between leisure and other economic goods and the "income effect" determine where the labor supply curve sits in the x-y space.
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Which economist formulated the "contestability hypothesis"?
William Buamol
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Which of the following is not true with regard to environmental economics?
The "tragedy of the commons" refers to a lack of private property rights which results in overuse of natural resources.
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Which of the following is true with the respect to the Food and Drug Administration's (FDA's) drug testing guidelines?
ALL TRUE
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Which of the following if true with respect to the following anti-trust cases?
ALL TRUE
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Which of the following is not true?
If the real interest rate decreases, the discounted present value of a stream of fixed income payments falls.
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Which of the following is a result of profit-seeking speculators?
Destabilizes prices over time.
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A.C. Pigou claims the market price system can fail to reach allocative efficiency because:
Of positive externalities
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Suppose a drought hits the pineapple growing regions of Hawaii. Diagram the role of successful profit making speculators over two time periods. Be sure to label everything. Finally, list and explain the 4 economic functions of speculators.
 - 1) Produce stability over time, by supplying a constant supply of goods they make market stable.
- 2) Have a known knowledge of future economic events
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Diagram the bank. Be sure to label everything including both X and Y axes, what both curves represent, and the area defining the saver's, borrower's, and bank's gain.
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