Suppose that in October the price of a cup of cafe latte was $2.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 300 lattes were consumed. What might have caused this change?
A) The price of tea (a substitute for cafe lattes) rose.
B) The price of tea (a substitute for cafe lattes) fell.
C) The price of coffee beans (an input of production of cafe lattes) rose.
D) The price of coffee beans (an input of production of cafe lattes) fell.
B
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Which of the following most closely approximates the conditions of a monopolistically competitive market?
A. The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product. B. The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers. C. Local cable television service, where a licensed supplier competes with firms offering satellite service. D. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.
The economic theory that emphasizes the role of difficulties in coordinating economic affairs as a cause of economic fluctuations is known as:
A. Keynesian economics. B. investment cycle theory. C. real business cycle theory. D. technology shock theory.
Based on price setting behavior, we know that an increase in the unemployment rate will cause
A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the PS curve.