In which of the following situations is the absolute price elasticity of demand for an item most likely to exceed a value of 1?
A) when there are very few close substitutes for the item
B) when there are very few producers of the item
C) when the item's share of expenses in consumers' budgets is very small
D) when there is considerable time to adjust to a change in the price of the item
D
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Answer the next question on the basis of the following demand schedule.PriceQuantity Demanded$615243342516The price elasticity of demand is unit-elastic (based on the midpoint formula)
A. over the entire $6 to $4 price range. B. over the entire $3 to $1 price range. C. throughout the entire price range because the slope of the demand curve is constant. D. in the $4 to $3 price range only.
If the price of a product is expected to increase in the future, the supply today will increase
Indicate whether the statement is true or false
Ceteris Paribus, if current output has fallen below potential ________
A) a positive inflation gap will ensue B) it is likely that the equilibrium real rate has fallen below the policy rate C) a negative unemployment gap will ensue D) it is likely that the equilibrium real rate has risen above the policy rate E) none of the above
From the profit maximizing conditions for the Cobb-Douglas production function, we find that the optimal input demands for labor and capital may be related as L = brK/(aw). Under what conditions are the expenditures on capital and labor equal?
A) Constant returns to scale B) Increasing returns to scale C) Decreasing returns to scale D) a = b