Which statement is true for a monopoly firm, but not for a competitive firm?
Correct Answer: C
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.
Question 2
Which pillar of formal institutions represents the coercive power of governments?
Correct Answer: C
InGlobal Economics for Managers, theregulatory pillarof formal institutions represents thecoercive power of governments, making option C correct. Regulatory institutions consist of laws, rules, regulations, and enforcement mechanisms that shape economic behavior through rewards and punishments. The regulatory pillar relies on the authority of the state to enforce compliance. Governments impose sanctions such as fines, imprisonment, or license revocation to ensure adherence to laws. For firms, this pillar defines what is legally permissible in areas such as labor practices, taxation, environmental standards, and competition policy. The other institutional pillars-normative and cognitive-do not rely on coercion. Normative institutions are based on social norms and values, while cognitive institutions reflect shared beliefs and taken-for-granted assumptions. Understanding the regulatory pillar is essential for managers because violations can result in severe legal and financial consequences. Thus, option C correctly identifies the pillar associated with government coercive power.
Question 3
What is one of the three primary types of foreign exchange transactions?
Correct Answer: B
In Global Economics for Managers, spot transactions are one of the three primary types of foreign exchange transactions, making option B correct. Spot transactions involve the immediate exchange of currencies, typically settled within two business days. The three main foreign exchange transactions are: Spot transactions Forward transactions Swap transactions Spot transactions form the foundation of currency trading and are widely used for international trade payments and short-term currency needs. Options C and D describe strategies rather than transaction types. Thus, option B is correct.
Question 4
What are properties of a typical indifference curve? (Choose TWO.)
Correct Answer: A,C
InGlobal Economics for Managers, indifference curves have two key properties:higher curves represent higher utility, andcurves do not cross, making options A and C correct. If curves crossed, preferences would be inconsistent. Higher curves indicate greater satisfaction. Options B and D violate consumer theory assumptions. Thus, A and C are correct.
Question 5
A country has experienced a decrease in inflation. What is the effect on the country's currency exchange rate?
Correct Answer: C
In Global Economics for Managers, a decrease in inflation generally leads to an appreciation of a country's currency, making option C correct. Lower inflation increases the purchasing power of a country's currency relative to others. As domestic prices rise more slowly than foreign prices, exports become more competitive, and demand for the currency increases. Under purchasing power parity, lower inflation is associated with currency appreciation. Options A, B, and D contradict established exchange rate theory. Therefore, option C is correct.
