Answer the following statement true (T) or false (F)
1) If the coefficient of cross elasticity of demand is positive, the two products are complementary
goods.
2) An income elasticity coefficient of -1.8 means the product is a normal good.
3) A cross elasticity of demand coefficient of +2.5 indicates that the two products are substitutes.
4) We would expect the coefficient of cross elasticity of demand for DVD players and DVDs to be
positive.
1) F
2) F
3) T
4) F
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Answer the following statements true (T) or false (F)
1) Vertical integration can increase and decrease a firm's costs. 2) If all stages of production occur within a vertically integrated firm, the firm has no taxable transactions during production. 3) Costs incurred in imposing compliance with a contract between an upstream firm and a downstream firm are considered to be monitoring costs. 4) If an upstream firm and a downstream firm have a long-term contract regarding the price of an input, a change in the market price of the input can result in either the upstream or downstream firm to incur an opportunity cost. 5) If the vertical integration between two firms creates greater managerial diseconomies than cost savings, the merger will increase the combined firm's overall costs.
Assuming price elasticity of demand is reported as an absolute value, a good with unit elastic demand has an elasticity:
A. between zero and one. B. greater than one. C. less than one, but greater than zero. D. equal to one.
If the tax multiplier is -12 and taxes are increased by $6 billion, output
A. falls by $2 billion. B. increases by $72 billion. C. falls by $72 billion. D. increases by $2 billion.
In contrast to first-dollar insurance coverage, one concern about HMOs is that:
A. patients will receive more medical care than they need. B. the price of medical care will be too low. C. acute treatment will be overemphasized. D. patients will not receive adequate medical care.