Question 41 The kinked demand curve model of oligopoly is based on a belief that:
A) firms will follow the market leader in setting prices. B) a price increase by one firm will likely not be followed by its competitors, but a decrease will. C) one firm has a significant cost advantage and produces a relatively large proportion of the industry’s output. D) firms compete on price, quality, and advertising to differentiate their products.
The correct answer was B) a price increase by one firm will likely not be followed by its competitors, but a decrease will. The kinked demand curve model is based on the assumption that an increase in a firm’s product price will not be followed by its competitors, but a decrease in price will be followed. A firm believes that for price increases above the “kink” in the demand curve, demand for its product is elastic and the firm will lose market share.
This question tested from Session 5, Reading 20, LOS d, (Part 1)
Question 42
Which of the following statements about the short-run and long-run decision time frames is most accurate?
A) In the long run, a firm can adjust its input quantities, production methods, and plant size. B) In the long run, quantities of some resources are fixed. C) In the short run, technology of production is variable. D) In the short run, economists treat plant size and the amount of capital equipment as variable. The correct answer was A) In the long run, a firm can adjust its input quantities, production methods, and plant size In the short run, quantities of some resources, including technology of production, are fixed. Typically, economists treat labor and raw materials as variable, holding plant size, the amount of capital equipment, and technology constant. In the long run, all factors of production are assumed to be variable.
This question tested from Session 4, Reading 17, LOS a
Question 43
If the central bank unexpectedly decreases the rate of money supply growth in order to reduce inflation, the unemployment rate will most likely:
A) increase as a result of a decreases in aggregate supply and real wages. B) decrease, and real gross domestic product (GDP) growth will decrease. C) increase, and actual inflation will be less than expected inflation. D) decrease in the short run.
The correct answer was C) increase, and actual inflation will be less than expected inflation. If the central bank decreases the money supply unexpectedly, real wages increase because actual inflation is less than expected inflation. This causes a short-run decrease in aggregate supply, decreasing real GDP growth and increasing the unemployment rate.
This question tested from Session 6, Reading 26, LOS e, (Part 1)
Question 44
The new Keynesian (or Taylor) feedback rule:
A) emphasizes price level stability at every stage of the business cycle. B) suggests increases in the federal funds target rate if inflation decreases. C) focuses on reducing differences between real GDP and potential real GDP. D) uses the growth rate of the money supply as its primary policy variable. The correct answer was C) focuses on reducing differences between real GDP and potential real GDP The new Keynesian feedback rule places emphasis on both price level stability and business cycle stability (i.e., reducing deviations of real GDP from potential real GDP). The rule increases the federal funds target rate as inflation and inflation indicators increase as well as when real GDP rises above potential GDP. The new Keynesian feedback rule uses the federal funds target rate as its policy variable, whereas the new monetarist feedback rule uses the growth rate of the money supply.
This question tested from Session 6, Reading 28, LOS e
Question 45
Which of the following sources of information should an analyst consider the least reliable?
A) Corporate press release. B) Form 10-Q. C) Proxy statement. D) Quarterly or semiannual report.
The correct answer was A) Corporate press release. Corporate press releases are written by management and are often viewed as public relations or sales materials because of the great possibility of inherent management bias in such documents. Often, little or none of the material is independently reviewed by outside auditors. Such documents are not mandated by the securities regulators. The Form 10-Q (quarterly financial statements) and proxy statements are mandatory SEC filings in the U.S., which inherently increases their reliability given the strict penalties that are imposed by the SEC if any serious irregularities are subsequently found. Although not necessarily audited (and not likely as reliable as information contained in the Form 10-Q and proxy statements), quarterly and semiannual reports should be reviewed by analysts since they are interim reports that typically update the major financial statements and footnotes. This question tested from Session 7, Reading 29, LOS e | 
发表于 2008-5-26 11:56
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