If a 2 percent increase in the price of product X causes the demand for product Y to increase by 6 percent, then:
A. X and Y are complements.
B. X and Y are substitutes.
C. X and Y are independent goods.
D. the demand for X is elastic.
Answer: B
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Experience with patents in the pharmaceutical industry shows that when patents on drugs expire
A) prices remain high without patent protection because of a lack of competition. Firms that are not granted patents cannot compete with firms that are granted patents. B) other firms are free to produce chemically identical drugs. Competition reduces the profits that had been earned by the firms that received patents. C) most patients will continue to buy the drugs from the same firms because their doctors recommend they buy brand-name drugs. D) firms will find ways to obtain additional patent protection—often by making cosmetic changes in drugs that were patented—so that they can continue charging high prices.
The existence of network externalities implies that: a. the value of a network falls as the number of members rises. b. the opportunity cost of switching networks is higher for larger networks. c. smaller networks are more successful than larger ones
d. newer networks are more likely to become locked in. e. only the most efficient and superior technology prevails in the market.
Governments establish the laws that regulate the interaction between businesses and households but do not serve as actors in the economy themselves.
Answer the following statement true (T) or false (F)
The merger of two pizza restaurant chains would be an example of
A) a horizontal merger. B) a vertical merger. C) a conglomerate merger. D) an independent merger.