Demand is elastic if the price elasticity of demand is
a. less than 1.
b. equal to 1.
c. equal to 0.
d. greater than 1.
d
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Assume that the four-firm concentration ratio in an industry is 85 percent. Which of the following statements uses one of the five competitive forces to argue that this industry may be more competitive than its concentration ratio suggests?
A) Even though concentration is high, large firms in the industry may act competitively by spending large sums on advertising. B) The high concentration may be due to patents owned by the largest firms but competition will increase when patent rights expire. C) The threat of entry into this industry can cause firms in the industry to lower their prices and profits in order to deter entry. D) If high concentration is the result of large firms owning much of the available supply of a key input, the industry will become more competitive when new sources of the input are discovered by other firms.
The supply of high-powered money is $100,000 and the money supply is $500,000. If every individual wishes to hold 5% of his or her deposits in the form of cash, then the bank reserve-holding ratio must be
A) 0.25 if banks have made all loans acceptable by the Federal Reserve requirements. B) 0.20 if banks have not made all loans acceptable by the Federal Reserve requirements. C) 0.17 if banks have not made all loans acceptable by the Federal Reserve requirements. D) 0.16 for any of the legally required reserve amount.
The price of bonds and the interest rate are
A) inversely related. B) positively related. C) unrelated. D) related, but we are not sure how.
According to the text, today's Lorenz curve is
A) a straight line. B) a vertical line. C) more bowed than in 1929. D) less bowed than in 1929.