Imagine winning a radio trivia contest and being given the choice of three packages. Each package has two prizes. One package has a cellular phone and a beeper; one package has a cellular phone and a coupon for unlimited calls for a year; and one
package has a cell phone and a compact disc player. Unfortunately, the labels on the packages only give you the following information: the goods in Package A have a cross elasticity of 0.63, the goods in Package B have a cross elasticity of 0.00 . and the goods in Package C have a cross elasticity of –0.84. a . Which package will you choose if you want the cellular phone and the coupon for unlimited calls? Explain your answer b. Which package will you choose if you want the cellular phone and the beeper? Explain your answer.
a . Package C, because the cellular phone and the coupon are complements and the cross elasticity for
complements is negative.
b. Package A, because the cellular phone and the beeper are substitutes and the cross elasticity for
substitutes is positive. The cross elasticity for the goods in Package B is 0, indicating unrelated goods.
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The law of diminishing marginal returns is the same as increasing returns to scale
a. True b. False Indicate whether the statement is true or false
Keynesians identify three principal motives for demanding money. They are the:
A. transactions demand, precautionary demand, and liquidity motive. B. transactions demand, precautionary demand, and convertibility motive. C. transactions demand, speculative demand, and volatility motive. D. transactions demand, speculative demand, and precautionary demand.
All of the following illustrate how government can correct for positive externalities EXCEPT
A) subsidies. B) regulation. C) government financing and production. D) charging effluent fees.
When demand is unit elastic, an increase in price will cause total revenue to increase, stay the same, or decrease, depending on the corresponding change in quantity demanded
Indicate whether the statement is true or false