A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami. The elasticity of demand for rice is
A. greater in Miami than in Gainesville, even taking into account the population difference.
B. greater in Gainesville than in Miami in spite of the population difference.
C. equal in Gainesville and Miami regardless of the population difference.
D. impossible to compare because of the population difference.
Answer: C
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If potential output exceeds actual output, ________ shifts downward over time
A) the short-run AD curve B) the long-run AD curve C) the long-run AS curve D) the short-run AS curve
Some firms provide stock options to managers as an incentive to work hard and increase the value of the firm. A typical option contract gives the manager the right to buy the firm's stock at a set price (known as the exercise price)
If the firm's stock value increases and moves above the exercise price, then the manager's option becomes more valuable. What is the potential problem with this incentive scheme? A) The incentive does not include a performance benchmark, so it cannot be optimal. B) There is a dynamic incentive problem --- the manager may focus too much on the firm's short-run stock value and not on actions that are in the best interest of the firm for the long run. C) The incentive value depends on the firm's stock value, which cannot be influenced by the amount of work or effort exerted by the manager. D) There are no problems with this incentive scheme.
In the prisoner's dilemma:
A. a dominant strategy exists for only one player. B. a non-cooperative outcome is predicted. C. a cooperative win-win outcome can be predicted. D. All of these statements are true.
If Jennifer didn't have class in the evening, she would save the $4 campus parking fee and spend four hours at work where she earns $10 per hour. The opportunity cost of attending class is: a. $0
b. $4. c. $40. d. $44.