Which panel of Figure 3.3 represents the changes in the market for textbooks when the cost of paper decreases and the government increases the number of student loans it grants?
A. A.
B. B.
C. C.
D. D.
Answer: A
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An increase in the purchasing power of money need not lead to an increase in the purchasing power of income because the falling price level would likely mean falling wages and salaries
Indicate whether the statement is true or false
Which of the following statements about a monopolistically competitive firm is TRUE?
A) A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits. B) A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost. C) A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve. D) A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue.
Firms 1 and 2 compete in a Cournot duopoly. If firm 2 adopts a strategy that raises firm 1's marginal cost:
A. firm 2 will lose market share. B. firm 1 will reduce its output. C. firm 2 will enjoy lower profits. D. None of the statements is correct.
If the price of a good rises by 10% and the percentage decrease in the total amount consumers spend on the good is 10%, then the good is
A. unit elastic. B. inelastic. C. elastic. D. perfectly inelastic.