If the price elasticity of supply of tablets is constant and equal to 2.5, a 10 percent increase in price will result in a change in quantity supplied equal to
A) 2.5 percent.
B) 25 percent.
C) 20 percent.
D) -20 percent.
Answer: B
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If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive one, we would conclude that the monopolistically competitive firm:
A. earns the same profit as a perfectly competitive firm. B. creates less consumer surplus. C. produces more output. D. All of these statements are true.
Jan's Dry Cleaning holds $10,000 on a typical day, although only $2,000 is essential for carrying out business. Making a midday deposit is estimated to reduce cash holdings to $8,000 and cost an extra $80 per year in lost production. If, in addition, an armored car service is engaged to pick up cash more frequently for a fee of $120 per year, cash holdings will be further reduced to $6,000 per day. Employing a computerized cash management service for an annual fee of $180 would reduce cash holdings further to $4,000. If any reduction in cash holdings will be invested in government bonds earning 7 percent, then how much money should Jan's hold?
A. $4,000 B. $10,000 C. $6,000 D. $8,000
Which of the following is NOT an assumption of the classical model?
A. Pure competition exists. B. Wages and prices are flexible. C. Inflation will lead to money illusion. D. People are motivated by self-interest.
Refer to the above data. If this economy were an open economy, the equilibrium GDP will be:
A. $650 billion
B. $600 billion
C. $550 billion
D. $500 billion