The income elasticity of demand for low-quality beef is -2. Thus, a 5% increase in the quantity of low-quality beef demanded
A. is the result of a decrease in income of 2.5%.
B. is the result of an increase in income of 2.5%.
C. is the result of a decrease in income of 10%.
D. is unrelated to any change in income.
Answer: A
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
Which of the following are government franchises?
a. Regional phone companies. b. The United States Postal Service. c. Electric utilities. d. All of the above.
A competitive price-taker firm would be willing to remain in the industry in the long run at zero economic profit because
a. it would find it too difficult to exit from the industry in the long run. b. accounting profit would be negative. c. it is covering all costs, including the opportunity cost of capital and labor. d. its sunk costs would prevent it from leaving the industry.
Which of the following industries is most likely to exhibit the characteristic of free entry?
a. electricity b. satellite radio c. mineral mining d. tennis shoes