Suppose the price of beans rises from $1.00 a pound to $2.00 a pound, quantity demanded falls from 10 units to 6 units, the coefficient of elasticity of demand for beans using the arc elasticity approach is
A) -1.33.
B) -0.75.
C) -0.4.
D) -0.25.
B
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If a financial institution extends a 25 year loan at a 6 percent interest rate, and then the inflation rate increases suddenly and unexpectedly to 6 percent per year, the institution receives on its loan a real return of
A) minus 12 percent. B) zero percent. C) 6 percent. D) 12 percent. E) 36 percent.
What are rational expectations, and how might rational expectations make monetary policy ineffective?
What will be an ideal response?
Figure 10-1
?
Suppose a perfectly competitive firm’s situation is shown in Figure 10-1 and the firm is currently producing at B. What should the firm do in this situation?
A. The firm should continue producing at B since that is the short-run equilibrium. B. The firm should increase production to C, so that MR = MC. C. The firm should decrease production to lower marginal costs. D. The firm should lower the price and continue to produce at B.
Economists believe that people respond to incentives in predictable ways. Therefore, if the government imposed a tax on each child born, you would expect that: a. families would have the same number of children, but wait longer to begin having them. b. more children would be born, but spaced further apart
c. more children would be adopted. d. fewer children would be born.