If consumers view cappuccinos and lattes as substitutes, what would happen to the equilibrium price and quantity of lattes if the price of cappuccinos rises?
A) Both the equilibrium price and quantity would increase.
B) Both the equilibrium price and quantity would decrease.
C) The equilibrium price would increase, and the equilibrium quantity would decrease.
D) The equilibrium price would decrease, and the equilibrium quantity would increase.
Answer: A) Both the equilibrium price and quantity would increase.
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Figure 10-7
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Figure 10-8 displays the cost curves of a perfectly competitive firm. Profits at a price of $10 would be approximately
A. $1 per unit. B. $3 per unit. C. $5 per unit. D. $10 per unit.
Suppose a basket of goods that costs $400 in the United States costs only £200 in Britain and the current exchange rate is $1/pound. According to the purchasing power parity theory, the equilibrium exchange rate should be higher than $1/pound. Why?
a. The basket could be purchased in Britain for £200 and sold in the United States for $400, and the $400 could be used to purchase £400 for a £200 profit. b. The basket could be purchased in Britain for £200 and sold in the United States for $200, and the $200 could be used to buy £200, for a £500 profit. c. The basket could be purchased in the United States for $400 and sold in Britain for £400, and the £400 could be used to buy $1,400, for a £1,000 profit. d. The basket could be purchased in the United States for $200 and sold in Britain for £400, and the £400 could be used to buy $800, for a $400 profit. e. The basket could be purchased in the United States for $200 and sold in Britain for £400, and the £400 could be used to buy $900, for a £500 profit.
When positive externalities are present, it leads to an underallocation of resources in that area relative to that which is socially desirable
a. True b. False Indicate whether the statement is true or false
Consider the labor market for short-order cooks. A labor-augmenting technological change such as a faster food processor will cause
a. both equilibrium wages and equilibrium employment to increase. b. both equilibrium wages and equilibrium employment to decrease. c. equilibrium wages to increase and equilibrium employment to decrease. d. equilibrium wages to decrease and equilibrium employment to increase.