Suppose the price of coffee is $6 per pound. If this price is an absolute price, what is meant by the phrase "$6 per pound"? If this price is a relative price, what is meant by the phrase "$6 per pound"?
What will be an ideal response?
When absolute prices are used, the term dollar simply means the green pieces of paper used for currency in the U.S. If the absolute price of coffee is $6 per pound, this means that the buyer must sacrifice $6 in currency to purchase 1 pound of coffee. When relative prices are used, the term dollar is a convenient shorthand for a representative collection of other goods available in the economy. If the relative price of coffee is $6 per pound, this means that the buyer can trade 6 units of other goods in exchange for 1 pound of coffee.
You might also like to view...
You work as a marketing analyst for a pharmaceutical firm, and you are trying to gather information about the marginal cost of production for a competing firm
You know that they have a patent on a popular medication that sells for $20 per dose, and you believe the elasticity of demand for this product is roughly -4. Assuming the competing firm acts as a profit-maximizing monopolist, what is the competing firm's approximate marginal cost of production? A) $10 per dose B) $12.50 per dose C) $15 per dose D) $20 per dose
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 The production effect of the tariff on wine is worth about
A. $250,000. B. $2.75 million. C. $500,000. D. $2.5 million.
Total cost is calculated as
A. the sum of all the firm's explicit costs. B. the sum of average fixed cost and average variable cost. C. the sum of total fixed cost and total variable cost. D. the product of average total cost and price.
Which of the following sets of outcomes is mutually exclusive?
A) win, lose, tie B) employed full-time, employed part-time, unemployed C) married, single, widowed D) All of the above.