A local pizzeria charges $10 for a pizza. The owner of the pizzeria wants to increase the company's total revenue. A recent market research shows that the price elasticity of demand for his pizza is about 1.5
Should the pizzeria lower or raise the price? Explain your answer.
The pizzeria should lower the price. Since the demand is price elastic, the percentage decrease in price will be smaller than the percentage increase in the quantity of pizza demanded caused by this price decrease. Therefore, the total revenue will increase.
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If penalties are imposed on both the buyers and the sellers of illegal goods or services, then an effect in the market for the illegal good or service would definitely be
A) an increase in the equilibrium price. B) a decrease in the equilibrium price. C) a decrease in the equilibrium quantity. D) an increase in the equilibrium quantity.
A physician's knowledge and skills are referred to by economists as
a. human capital b. labor c. physical capital d. entrepreneurship e. intellectual raw materials
One of the principal factors behind the U.S. trade deficits of the 1990s has been
A. slow growth and recession in many important trading partners. B. rapid growth and inflation in many important trading partners. C. significant depreciation of the dollar. D. rising real interest rates in the United States.
Assume that a country produces only cloth and rice. Cloth production requires significant amounts of labor and capital, but relatively less land. Assume that rice production requires relatively less labor and capital, but relatively large amounts of land. If there is an increase in the country's endowments of capital and labor, the Rybczynski theorem predicts that:
A. the production of cloth will increase, but that of rice will remain unchanged. B. the production of both rice and cloth will increase. C. the production of cloth will increase, but that of rice will decline. D. the production of rice will increase, but that of cloth will remain unchanged.