When purchasing autos and other durable goods, consumers tend to use discount rates that are inversely proportional to their income, so the discount rates are lower for consumers with higher income. The key reason for this behavior is that:
A) lower income consumers face very strict cash constraints, and they expect these problems to get worse in the future.
B) high income consumers tend to have lower opportunity costs for money.
C) high income consumers tend to make long-term investments (e.g., 30-year bonds), which always pay lower interest rates than short-term investments.
D) none of the above
B
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Assume the price elasticity of demand for a good is -3. In this case, a decrease in price would result in marginal revenue of (2/3)P
Indicate whether the statement is true or false
Long-run unemployment arises from a single problem that has a single solution
a. True b. False Indicate whether the statement is true or false
In general in the real world labor market the:
A. price effect usually dominates, and thus we assume a downward sloping supply curve. B. income effect usually dominates, and thus we assume an upward sloping supply curve. C. income effect usually dominates, and thus we assume a downward sloping supply curve. D. price effect usually dominates, and thus we assume an upward sloping supply curve.
According to prospect theory, what strategy will firms typically employ with regard to pricing and packaging of their goods, when faced with rising production costs?
A. Firms will increase both package sizes and prices but will increase prices more to communicate to consumers that the product has greater value. B. Firms will reduce package sizes but keep prices the same, thus increasing the per unit price of the good. C. Firms will keep package sizes the same but lower prices and attempt to cover the higher costs with greater revenue. D. According to prospect theory, the choice of strategy doesn't matter, as consumers are generally able to recognize price increases regardless of what form they take.