In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the
equilibrium quantity (Q) of X. Refer to the given information. An increase in the prices of resources used to produce X will:
A. increase S, increase P, and increase Q.
B. increase D, increase P, and increase Q.
C. decrease S, decrease P, and decrease Q.
D. decrease S, increase P, and decrease Q.
Answer: D
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Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the price of cowboy hats increases from $38 to $46
A) there will be a surplus of cowboy hats. B) producer surplus will rise from $22 to $46. C) consumers will buy no cowboy hats. D) the marginal cost of producing the third cowboy hat will increase to $46.
On any given day, a salesman can earn $0 with a 20% probability, $100 with a 40% probability, or $300 with a 20% probability. His expected earnings equal
A) $0. B) $100 because that is the most likely outcome. C) $100 because that is what he will earn on average. D) $200 because that is what he will earn on average.
If the demand for air travel were to change so that business travelers and vacationers have the same price elasticity of demand for air travel,
A) airlines would charge the same price to each type of flyer. B) airlines would still charge business flyers a higher fare since the traveler's employer pays anyway. C) airlines would be driven out of business. D) airlines would counter by charging vacationers a higher fare.
With respect to monopolies, deadweight loss refers to the
A) socially unproductive amounts of money spent to obtain or acquire a monopoly. B) net loss in consumer and producer surplus due to a monopolist's pricing strategy/policy. C) lost consumer surplus from monopolistic pricing. D) none of the above