Refer to the Article Summary. What happens to the profit a car company makes on each car sold if it offers incentives such as discounts, cash rebates, or lease incentives to customers? How might a car company decide which of these strategies to use
What will be an ideal response?
Offering cash rebates, discounts, or lease incentives will each decrease profits. Offering any of these incentives will, effectively, increase the average total cost for the company. In deciding which of these strategies to use, the firms will probably assess consumer demand to see which approach consumers prefer.
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Which of the following events create an outward shift of the production possibilities curve?
A. The United States moves resources from the production of goods for domestic production to the production of goods for export. B. Tax reductions reduce the cost and increase the amount of investment in factories, machinery, and research and development. C. There is an migration of young people to another country where there is more political freedom. D. The unemployment rate falls from 33 percent to 12 percent.
The permanent-income hypothesis seeks primarily to explain the
A) observed long-term constancy of the saving ratio. B) observed variation in the short-term saving ratio. C) unimportance of transitory income changes. D) All of the above are correct.
Market clearing price
A) refers to a movement along the demand curve. B) refers to a supply curve. C) exists at a the point at which quantity demanded equals quantity supplied. D) refers to a surplus.
When price is $5 per unit, quantity demanded is 12 units. When price is $6 per unit, quantity demanded is 8 units. The value of the absolute price elasticity of demand is approximately
A. 0.36. B. 2.20. C. 1.82. D. 4.00.