The cross-price elasticity of demand between bread and potatoes is estimated to be 0.5. This implies bread and potatoes are:
A. normal goods.
B. complements.
C. substitutes.
D. unrelated.
Answer: C
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Suppose a firm in a perfectly competitive market is operating at its profit-maximizing level of output. Will the firm suspend operations if it faces a reduction in the price it can charge for its product?
a. No, because it can always raise its prices in the short run. b. No, because it can always raise its prices in the long run. c. No, as long as the firm earns sufficient revenue to pay all of the variable costs. d. Yes, since it never makes sense to operate at a loss, even in the short run. e. No, because it always makes sense to operate at a loss, even in the long run.
Suppose there are 12 million part-time workers and 104 million full-time workers in an economy. Four million of the part-time workers switch to full-time work. We can conclude that
A. the official unemployment rate will fall. B. the official unemployment rate will rise. C. the official unemployment rate will remain unchanged. D. the size of the labor force will increase.
You paid $25 for your ticket to the football game, only to see your favorite team losing 28-0 at the end of the first quarter. That $25 should now be regarded as a(n) ____ cost that should be ____ in your decision on whether or not to stay at the game.
Fill in the blank(s) with the appropriate word(s)
If the nominal interest rate is 5 percent and inflation is 3 percent, the real interest rate is:
A. 8 percent. B. 0 percent. C. 2 percent. D. 15 percent.