What is price elasticity of demand? Why is it significant?
The price elasticity of demand measures by how much quantity demanded responds to a change in price. The word "elasticity," in its everyday use, refers to stretchiness: material with more elastic stretches more, while material with less elastic stretches less. The price elasticity of demand has the same general meaning, except that in this case the stretchiness refers to how much the quantity demanded stretches or contracts in response to a change in price.
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If the tax base is narrowed through an increase in exemptions, ______ in order to raise the same level of revenue
a. tax rates must be lowered b. tax rates must be raised c. tax expenditures must be increased d. nothing must happen
Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs $2,000 and a unit of advertising on the radio costs $5,000. At their current advertising levels, the
marginal benefit of advertising in the flyer is $2,500 and the marginal benefit of advertising on the radio is $5,000. Which of the following is true? A) To maximize profits, Franco's should increase the amount of advertising in flyers. B) To maximize profits, Franco's should decrease the amount of radio advertising. C) To maximize profits, Franco's should decrease the amount of advertising in flyers. D) Franco's is currently maximizing its profits from advertising.
Lori, who currently owns stock in four companies, has decided to expand her portfolio by purchasing stock in virtually every company that sells stock. In doing so, Lori will
a. increase the risk of her portfolio. b. decrease some, but not all, of the risk of her portfolio. c. decrease all of the risk of her portfolio. d. leave the risk of her portfolio unchanged from its present level.
A single firm that charges the monopoly price in the market earns $800. If another firm successfully enters the market, the incumbent's profits fall to $500 and the entrant earns $450. If the incumbent engages in limit pricing, its profits are $600. For what interest rate, i, is limit pricing a profitable strategy for the incumbent?
A. i > 1.5 B. 0.5 < i < 1.0 C. i < 0.5 D. 1.0 < i < 1.5