The cross-price elasticity of demand between good X and good Y is 2.75. Given this information, which of the following statements is true?
A. Goods X and Y are complements.
B. The demand for goods X and Y is income inelastic.
C. The demand for goods X and Y is inelastic.
D. Goods X and Y are substitutes.
Answer: D
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What will be an ideal response?
In the above figure, if the price is $8 per unit, how many units will a profit maximizing perfectly competitive firm produce?
A) 5 B) 20 C) 30 D) 35
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. Max's explicit cost amounts to $3,000 per
month more than his revenue. Should Max continue operating his business? A) Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor. B) Max should continue to run the tattoo parlor until his lease runs out. C) If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business. D) This cannot be determined without information on his revenue.
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What will be an ideal response?