If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by:
A. 55 percent.
B. 5.5 percent.
C. 0.55 percent.
D. 550 percent.
Answer: B
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If the quantity of money starts to grow more rapidly than real GDP and velocity does not change, the result is
A) slower growth in the price level. B) an increase in investment. C) more rapid growth in potential GDP. D) the inflation rate rises. E) an eventual slowing in the growth rate of the quantity of money.
Adam spent $10,000 on new equipment for his small business, "Adam's Fitness Studio." Membership at his fitness center is very low and at this rate, Adam needs an additional $12,000 per year to keep his studio open. Which of the following is true
A) The fixed cost of running the studio is $22,000. B) The $10,000 Adam spent on equipment is the total cost of starting the business and the $12,000 he'll need to continue operations is a marginal cost. C) The variable cost of running the studio is $22,000. D) The $10,000 Adam spent on equipment is a fixed cost of business and the $12,000 he'll need to continue operations is a variable cost.
A village has five residents, each of whom has an accumulated savings of $50. Each villager can use the money to buy a government bond that pays 10 percent interest per year or to buy a year-old goat, send it onto the commons to graze, and sell it after one year. The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons, which in turn depends on the number of goats sent onto the commons, as shown in the table below. Assume that if a villager is indifferent between buying a bond and buying a goat, the villager will buy a goat.Number of goatson the commonsPrice per 2-yearold goat ($)Income pergoat ($/year)180302752537020465155555 If the villagers purchase the socially optimal number of goats and bonds,
then total village income will be ________. A. $15 B. $125 C. $250 D. $70
Refer to the graph shown. To maximize profit, this perfectly competitive firm should produce:
A. 30 units of output. B. 60 units of output. C. 50 units of output. D. 40 units of output.