The formula "fixed costs (FC) + variable costs (VC)" represents which quantity?
Correct Answer: C
InGlobal Economics for Managers,total cost (TC)is defined as the sum offixed costs (FC)andvariable costs (VC), making option C correct. The formula is: TC = FC + VC Fixed costs do not change with output in the short run, while variable costs vary with production. Total cost captures the full cost of producing a given level of output. Average cost divides total cost by quantity, marginal cost measures the cost of one additional unit, and implicit cost reflects opportunity costs. Therefore, option C correctly identifies total cost.
Question 27
Which changes increase demand? (Choose TWO.)
Correct Answer: A,B
InGlobal Economics for Managers, demand for a good increases when factors other than its own price change in a favorable direction. Two such changes arean increase in the price of a substituteanda decrease in the price of a complement, making options A and B correct. When the price of asubstituterises, consumers switch toward the relatively cheaper alternative, increasing demand for the good in question. For example, if the price of coffee increases, demand for tea may rise. When the price of acomplementfalls, consumers are more likely to purchase both goods together, increasing demand. For instance, a decrease in the price of printers raises demand for printer ink. Options C and D reduce demand rather than increase it. Thus, A and B correctly identify changes that increase demand.
Question 28
If the demand for a good is inelastic, what is true?
Correct Answer: B
InGlobal Economics for Managers, demand isinelasticwhenquantity demanded responds only slightly to changes in price, making option B correct. Inelastic demand is common for necessities, goods with few substitutes, or goods that represent a small portion of income. When demand is inelastic, price and total revenue move in the same direction. Options A, C, and D describe elastic demand. Thus, option B correctly defines inelastic demand.
Question 29
Which characteristic is attributed to totalitarianism?
Correct Answer: D
InGlobal Economics for Managers,totalitarianismis characterized by theconcentration of absolute political power in the hands of a single individual or a single ruling party, making option D the correct answer. Under a totalitarian system, political authority is centralized, dissent is suppressed, and the state seeks to control not only political life but often economic, social, and ideological aspects of society as well. Unlike democratic systems, totalitarian regimes do not permit free elections, political pluralism, or meaningful checks and balances. Citizens are not granted the right to elect representatives, nor are freedoms of expression, association, or organization protected. Instead, political opposition is restricted or eliminated, and state power is maintained through coercion, propaganda, and control of institutions. Option A is incorrect because totalitarian systems generally involvehigh political risk, particularly for firms, due to arbitrary policy changes, expropriation risk, and weak legal protections. Option B describes liberal democratic systems that emphasize civil liberties. Option C is a defining feature of representative democracies, not totalitarian regimes. Global Economics for Managersstresses that totalitarianism presents significant challenges for global managers. While such systems may offer short-term stability or rapid decision making, they often involve unpredictable policy shifts, weak protection of property rights, and limited transparency. These conditions increase political risk and complicate long-term business planning. Therefore, option D correctly identifies the defining characteristic of totalitarianism as the delegation of absolute political control to one person or party.
Question 30
Which statement about Federal Reserve lending to banks is true?
Correct Answer: D
InGlobal Economics for Managers, banks that borrow directly from the Federal Reserve through the discount windowpay the discount rate, making option D correct. The discount rate is the interest rate the Fed charges banks for short-term loans. Option A is incorrect because Fed lending fluctuates based on economic conditions. Option B is incorrect because the discount rate can be changed at any time. Option C is incorrect because consumer interest rates are market-determined, not set at the discount rate. Thus, option D accurately describes Fed lending.
