A large airline calculates that the additional cost of a having a passenger on a flight to the Bahamas as the cost of a bag of peanuts and a soft drink, which totals $1.50, but the airline’s price is $600 for potential customers who want to buy vacant seats on the day of the flight. Which economic principle is this airline failing to utilize?
What will be an ideal response?
The airline is failing to think at the margin. If the cost of having another passenger on the flight is only $1.50, then the airline could charge a price well below $600 in order to encourage people to buy vacant seats, and for each seat sold, the airline would make additional profits.
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A reduced demand for lawyers' services to prosecute damage suits
A) lowers the cost of hiring a lawyer to draw up a will. B) raises the cost of hiring a lawyer to draw up a will. C) raises the demand for lawyers' services in drawing up wills. D) will not affect the cost of hiring a lawyer to draw up a will though it could affect lawyers' fees.
If a firm is in a perfectly competitive world but decides to charge a higher price than its competitors,
A) the firm's profits will be zero or negative, and the firm will fail in the long run. B) the firm's profits will be zero or negative, and the firm will fail in the short run. C) the firm's profits will be positive or negative, and the firm will fail in the short run. D) the firm's profits will be positive or negative, and the firm will fail in the long run.
Which of the following are reasons that banks are so heavily regulated?
a. Governments are concerned about the safety of deposits. b. The industry is a principal determinant of aggregate demand. c. Bank failures are contagious. d. All of the above are correct.
The labor supply curve starts to bend backward at the point where
A. the total utility of leisure exceeds the total disutility of labor. B. the marginal utility of additional income becomes zero. C. the income effect comes to dominate the substitution effect. D. the substitution effect comes to dominate the income effect.