When the price of hamburger went from $3 to $4 a pound, the quantity demanded of buns changed from 30 to 25 packages a day. The cross-price elasticity of demand for buns (using the initial value formula) is:
A. 1.4.
B. 0.5.
C. -0.5.
D. -1.4.
Answer: C
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What is measured on the vertical axis of the aggregate demand graph?
A) unemployment B) nominal income C) the price level D) real GDP per year
Suppose a paper mill earns $1,000,000 in profits when it pollutes a river, and it can abate pollution at a cost of $75,000. The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean and $300,000 if it's polluted. Suppose the law guarantees the farmer access to clean water from the river. Which of the following describes an efficient outcome in this case?
A. The owner of the mill is unable to pay the farmer enough to secure his permission to pollute the river. B. The owner of the mill pays the farmer $87,500 for his permission to pollute the river. C. The owner of the mill pays the farmer $112,500 for his permission to pollute the river. D. The farmer pays the owner of the mill $87,500 to stop polluting.
The concept of adverse selection helps to explain
A) why collateral is not a common feature of many debt contracts. B) why large, well-established corporations find it so difficult to borrow funds in securities markets. C) why financial markets are among the most heavily regulated sectors of the economy. D) why stocks are the most important source of external financing for businesses.
The Celler-Kefauver Act strengthened the nation's antitrust approach to merger enforcement by:
a. making all mergers illegal. b. making all conglomerate mergers illegal. c. creating the Federal Trade Commission. d. providing HHI guidelines the government could use to clarify antitrust enforcement. e. amending the Clayton Act to include the purchase of assets with cash of another company as a potential antitrust violation.