Suppose that a local supermarket sells apples and oranges for 50 cents apiece, and at these prices is able to sell 100 apples and 200 oranges per week. One week, the supermarket lowered the price per apple to 40 cents and sold 120 apples. The next week, they lowered the price per orange to 40 cents (after raising the price per apple back to 50 cents) and sold 240 oranges. These results imply that
the
a. price elasticity of apples is lower than the price elasticity of oranges
b. price elasticity of apples is higher than the price elasticity of oranges
c. demand for apples is more price sensitive than the demand for oranges
d. demand for oranges is more price sensitive than the demand for apples
e. price elasticities of demand for apples and oranges are the same over these price ranges
E
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In the market for automobile insurance, adverse selection implies that
A) those who are insured might take greater risks. B) those who are uninsured might take greater risks. C) insured and uninsured alike will take greater risks. D) drivers with greater risks are more likely to buy insurance.
Imagine an economy that does not have international trade and is initially in equilibrium. Later the government increases the level of spending by $350 million because it received a gift from abroad. In this economy, only 65 cents of every dollar is spent, and the rest is saved. Calculate the value of the spending multiplier for this economy
a. 2.86 b. 0.286 c. 1.54 d. 0.154 e. 0.35
Which of the following would be a private cost to a cigarette manufacturer?
A. Price of leaf tobacco. B. Cost to the government of the hospital expenses of indigent smokers. C. Increased risk of cancer to the nonsmoking passengers in the smoker's carpool. D. Price of a pack of cigarettes.
The shape of the marginal cost curve reflects the
A. Law of diminishing marginal utility. B. Competitiveness of the firm. C. Law of demand. D. Law of diminishing returns.