The price of a ride on the Washington, D.C. metro depends on the time of day you ride. This is an example of
A. exploitation.
B. inefficiency.
C. political interference with a market.
D. pricing to spread out demand.
Answer: D
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In perfect competition, restrictions on entry into an market
A) apply to both capital and labor. B) apply to labor but not to capital. C) apply to capital but not to labor. D) do not exist.
Firms are better off using rebates rather than just lowering the price of a good because
A) people view the firm in a positive light because now poorer people will be able to afford their good. B) customers overestimate the value of the rebate and so buy more of the good, making profits higher than if they just lowered the price. C) only those who place a low value on their time or are price sensitive actually redeem the rebate, making profits higher than if they just lowered the price. D) lowering the price is inefficient and creates additional deadweight loss.
Empirical studies conclude that advertising
A) raises prices in all markets. B) can reduce the prices of many goods. C) reduces the prices on all goods. D) has no impact on prices.
Suppose the stocks for two relatively identical auto makers, A and B, are selling for $100 and $150 respectively. Both are predicted to sell for $200 in the coming year. What action do you expect investors engaging in arbitrage to take? What will be the ultimate effect of this action?
What will be an ideal response?