Figure 7-4
Following a rash of airplane bombs, the airlines have been forced to increase security at a cost of $30 million per year. The number of inspectors and machines does not vary with the number of passengers-the airlines must have sufficient staff available to handle the full-capacity load. Which graph in Figure 7-4 best illustrates the impact of the security expenditures?
a. 1
b. 2
c. 3
d. 4
c
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For goods on which a relatively small portion of income is expended, _____
a. income effects will be small relative to substitution effects b. income effects will be large relative to substitution effects c. income effects will be about the same as substitution effects d. there will be no income effects.
What happens when the price decreases in the case of a product that has elastic supply?
(A) Existing producers expand, and new producers enter the market. (B) Some producers produce less, and others drop out of the market. (C) New firms enter the market as older ones drop out. (D) Existing firms continue their usual output, but they earn less.
Firms that offer to pay for college tuition for their employees are investing in ________ capital.
A. tangible B. social C. productive D. human
When there is no comparative advantage between countries
A. the benefits resulting from trade are increased. B. there are no gains from specialization and trade. C. there must be an absolute advantage. D. each should try and specialize in the production of a particular commodity.