If the absolute value of the price elasticity of demand for cell phone service is 3, then if the price of cell phone service increases by 1%, quantity demanded would:
A. decrease by 3%.
B. increase by 3%.
C. increase by 0.33%.
D. decrease by 0.33%.
Answer: A
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One defense Microsoft can use to argue that it does not have monopoly power in the market for operating systems, is to show that
a. demand for operating systems is highly elastic. b. many other commodities have higher income elasticities of demand than operating systems. c. the cross elasticity of demand between Microsoft’s operating system and other operating systems is large and positive. d. many of its competitors' products are complements for its service.
Refer to Figure 1A.1. Assume that the graph in this figure represents the demand and supply curves for orange juice. An increase in the price of apple juice, which is a substitute for orange juice, would be represented by a shift from
A) Demand 1 to Demand 2. B) Demand 2 to Demand 1. C) Supply 1 to Supply 2. D) Supply 2 to Supply 1.
Which of the following statements is false?
A. A subsidy can be used to internalize a negative externality; a tax can be used to internalize a positive externality. B. Ronald Coase stressed the reciprocal nature of externalities. C. One way to deal with negative externalities is for government to apply regulations directly to the activity that generates the externalities. D. Simply because taxes and subsidies are sometimes used to adjust for negative and positive externalities, respectively, it does not necessarily follow that the socially optimal level of output will be reached.
Evidence in favor the Keynesian model would be that:
a. investment is not sensitive to changes in tax rates. b. labor supply is inelastic. c. the aggregate price level is positively correlated with income. d. all of the above. e. none of the above.