Why does a toothbrush have an inelastic demand and an automobile have an elastic demand?
What will be an ideal response?
Toothbrushes are a small part of one's budget, there are few good substitutes and additional income from a price drop will not lead to more consumption. Autos are a big part of household budgets, public transportation is a substitute for some, and the income effect of a price drop will likely lead to increased consumption.
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Suppose the residents of Metropolis travel to work either by bus or train. If the price of train tickets increases, then:
A. the demand for train tickets will decrease. B. the demand for bus tickets will increase. C. the demand for bus tickets will decrease. D. the demand for train tickets will increase.
In the above figure, what is the price the firm receives if the output is 8?
A) $10 B) $2 C) $7 D) $8
Which of the following is true for a pure monopolist?
a. The firm has a perfectly elastic demand curve. b. The firm will always earn an economic profit. c. The demand curve is above the marginal revenue curve. d. None of these is true.
What would be a way for the Federal Reserve to stimulate a sluggish economy?
A) buy government bonds on the open market B) encourage the stock market C) print more money D) sell more government bonds