Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm B produces a monitor that David buys, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to
the buyers who value them most highly, as measured by their willingness to pay. (ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.
a. (i) only
b. (ii) only
c. both (i) and (ii)
d. neither (i) nor (ii)
a
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The initial price of a cup of coffee is $1, and at that price, 400 cups are demanded. If the price falls to $0.90, the quantity demanded will increase to 500
a. Calculate the (arc) price elasticity of demand for coffee. b. Based on your answer, is the demand for coffee elastic or inelastic? c. Based on your answer to a., if the price of coffee is increased by 10%, what will happen to the revenues from coffee? Carefully explain how you know.
A seller cannot mislead purchasers of a(n) ________ good more than ________.
A) experience; once B) experience; twice C) inspection; twice D) inspection; once
If in the long run, any government policy that increases exports
A) also increases imports. B) decreases imports. C) has no impact on imports. D) makes imports become negative.
Suppose the government of New Country fixes the exchange rate of its currency, the Newo, in terms of the U.S. dollar. Initially the exchange rate is set at $0.50 per Newo. Later the government changes the exchange rate to $0.75 per Newo. This is an example of a(n):
A. depreciation. B. revaluation. C. appreciation. D. devaluation.