Gasoline and motel rooms are complements for many consumers. When the price of gasoline declines, consumers take longer vacations and rent more motel rooms. Therefore, the cross price elasticity between gasoline and motel rooms is
A. positive.
B. negative.
C. less than one because neither is a luxury.
D. more than one because both are luxuries.
B. negative.
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Refer to Market Diagram. What area represents the producer's surplus earned in the monopoly equilibrium?
The following questions refer to the accompanying market diagram. PC and QC are the equilibrium price and quantity if the firm behaves competitively, and PM and QM are the equilibrium price and quantity if the firm is a simple monopoly.
a. Area A + C + F.
b. Area C + F.
c. Area C + D + F + G.
d. Area C + D + E.
In most business situations where firms compete, often they can escape the prisoner's dilemma and reach the most profitable outcome. Which of the following is a reason for this?
A) Most games are repeated games and firms can employ retaliation strategies against those who do not cooperate. B) Most games are one-shot games so firms learn from their mistakes. C) Firms are constantly improving their products and anticipating changing consumer tastes. D) Firms engage in aggressive advertising to overcome the barriers to loyalty.
Store of value
Considering the law of one price, evidence in the foreign exchange markets over brief intervals shows:
A. the law works most of the time. B. the law only works in the very short run. C. this is the closest thing to a perfect law in economics. D. that the law fails most of the time.