Suppose that an Italian ice cream firm is facing a linear demand curve and that the current price for the Italian ice cream is set at a point where the price elasticity is 0.7. If the firm decreases the product price,
A. the demand becomes more inelastic and total revenue increases.
B. the demand becomes more inelastic and total revenue decreases.
C. the demand becomes less inelastic and total revenue increases.
D. the demand becomes less inelastic and total revenue decreases.
Answer: B
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If there are approximately 6,000 barrels of known reserves of oil, an estimated 10,000 barrels of unknown reserves of oil,
and it is estimated that the supply of oil will be depleted in 40 years, what is the annual consumption of barrels of oil, all else equal? A) 150 B) 250 C) 400 D) 1,600
Positive statements are
a. prescriptive. b. claims about how the world should be. c. claims about how the world is. d. made by economists speaking as policy advisers.
When the economy is in short-run equilibrium,
A) there are increases in inventory. B) there are decreases in inventory. C) total expenditures equal total production. D) people want to buy more than will be produced.
Economic theory is a valuable tool for business decision making because it
A. identifies for managers the essential information for making a decision. B. creates a realistic, complex model of the business firm. C. assumes away the problem. D. provides an easy solution to complex business problems.