Suppose that you're the manager of a firm. You notice that when you raised your price from $10 to $11, sales fell from 500 to 400. Should you raise your price more?
What will be an ideal response?
No. In fact, you should lower your price. At this price, the elasticity of demand is 2, so you're operating on the elastic portion of your demand curve. Here, it makes sense to lower the price to increase revenues.
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The supply curve for a perfectly competitive industry is obtained by
A. making an empirical study of historical data. B. vertically summing the supply curves of firms in the industry. C. horizontally summing the average cost curves of firms in the industry. D. horizontally summing the supply curves of firms in the industry.
Empirical evidence suggests that more digital cameras are being sold today than one year ago, and the selling price has decreased. The probable reason for this could have been an increase in supply
a. True b. False Indicate whether the statement is true or false
The international trade response to a contractionary monetary policy will cause aggregate demand to shift ____ and aggregate supply to shift ____.
A. outward; outward B. inward; outward C. outward; inward D. inward; inward
A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount: World price of wine (free trade):$20 per bottleDomestic production (free trade):500,000 bottlesDomestic production (after tariff):600,000 bottlesDomestic consumption (free trade):750,000 bottlesDomestic consumption (after tariff):650,000 bottles Before the tariff is imposed, the country imports ________ bottles of wine, but following the imposition of the tariff, the country will import ________ bottles of wine.
A. 750,000; 650,000 B. 150,000; 50,000 C. 100,000; 100,000 D. 250,000; 50,000