In the late 1980s, some medical authorities announced that an acne medication named Retin-A had previously unknown wrinkle-reducing properties. An economist would predict that, following this announcement, the price of Retin-A ____ and the quantity sold__.
A. would rise; would decrease
B. would rise; would increase
C. would fall; would fall
D. would fall; would rise
Answer: B
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The main factor that explains the difference between accounting cost and economic cost is
A) opportunity cost. B) fixed cost. C) variable cost. D) All of the above help to explain the difference.
If an economy's GDP falls, then it must be the case that the economy's
a. income falls and saving rises. b. income and saving both fall. c. income falls and expenditure rises. d. income and expenditure both fall.
Suppose that the value of the short-run absolute elasticity of demand for a good is 0.4. Then, we know the long-run absolute price elasticity of demand will be
A) 0. B) greater than 0.4. C) elastic. D) less than 0.4.
Refer to Figure 15-12. In the dynamic AD-AS model, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues no policy, then at point B
A) there is pressure on wages and prices to fall. B) the unemployment rate is greater than the natural rate of unemployment. C) firms are producing above capacity. D) incomes and profits are falling.