Which of the following statements is not correct?
A. If the relative change in price is greater than the relative change in the quantity demanded
associated with it, demand is inelastic.
B. In the range of prices in which demand is elastic, total revenue will diminish as price
decreases.
C. Total revenue will not change if price varies within a range where the elasticity coefficient is
unity.
D. Demand tends to be elastic at high prices and inelastic at low prices.
Answer: B
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A pharmaceutical company executive has to decide whether to fund a new drug development project. For this project, a success would earn $90 million and a failure would cost $10 million in lost profits. At what probability of expected success should she fund the project?
a. 0.10 b. 0.20 c. 0.80 d. 0.90
Suppose that a government agency is trying to decide between two pollution reduction policy options. Under the permit option, 100 pollution permits would be sold, each allowing emission of one unit of pollution. Firms would be forced to shut down if they produced any units of pollution for which they did not hold a permit. Under the pollution tax option, firms would be taxed $250 for each unit of pollution emitted. The regulated firms all currently pollute and face varying costs of pollution reduction, though all face increasing marginal costs of pollution reduction. Suppose the tax policy is adopted. A firm will be willing to pay the tax if $250 is less than or equal to:
A. the average cost of eliminating one unit of pollution. B. its average total cost of production. C. its marginal revenue. D. the cost of reducing its existing pollution by one unit.
In a competitive industry with identical firms, long-run equilibrium is characterized by:
A. MR = MC. B. P < MC. C. MR < P. D. P > AC.
In 2011, the official poverty line for a household of four in the United States was:
A. $22,891. B. $29,494. C. $11,702. D. $26,803.