If the supply of a good is perfectly inelastic, the price elasticity of supply will equal
A) positive infinity.
B) one.
C) zero.
D) none of the above.
Answer: C
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If there is a negative externality, and the market output is 100 units more than the socially optimal output, then it follows that
A. the external costs associated with the negative externality are greater than the marginal private costs. B. the external costs associated with the negative externality are less than the marginal private costs. C. there is market failure. D. any tax imposed on the production of the output will bring about the socially optimal output. E. none of the above
Consider a society consisting of just a farmer and a tailor. The farmer has 30 units of food but no clothing. The tailor has 60 units of clothing but no food. Suppose each has the utility function U = F1/3C2/3
If the price of clothing is always $1, and the food price is currently $1, then we can conclude A) the market is at a competitive equilibrium. B) the price of food will drop towards a competitive equilibrium. C) the price of food will increase towards a competitive equilibrium. D) None of the above.
Note: Amounts in billions.Refer to the above table. The equilibrium real GDP is
A. $14 billion. B. $13 billion. C. $12 billion. D. $15 billion.
Income elasticity of demand measures how ____________________.
A. responsive the quantity of one good demanded to a change in the price of another good B. the consumption of various goods and services respond to change in income C. the quantity demanded responds to a change in price D. responsive the quantity supplied is to a change in price