Assume the demand function for skin care products is given by Q = 1,000 - 20 P + 5I. If P=$25 and I=$1,000 currently, then
A. the elasticity of demand is equal to 10.
B. the elasticity of demand is equal to 11.
C. skin care products are inferior goods.
D. skin care products are normal goods.
Answer: D
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The Pacific Pulp Company plans to clearcut 100 acres of land to produce paper pulp which would earn the firm $50,000 in profits. One hundred nearby homeowners realize that this would reduce the value of each of their properties by $1,000. These 100 homeowners
a. face a logistical problem of getting together to offer a bribe to Pacific Pulp. b. would not benefit from offering any side payment to Pacific Pulp not to clearcut. c. have no legal option except to suffer the damages to their property values. d. can costlessly organize to offer Pacific Pulp a side payment not to clearcut.
The individual transferrable quota system (ITQ) used to control overfishing is a variation of
A) the tragedy of the commons. B) a prisoner's dilemma game. C) the cap-and-trade system. D) a negative externality.
A McDonald's franchise is an example of
A) horizontal integration. B) quasi-vertical integration. C) a vertical merger. D) None of the above.
Which of the following will cause an outward (rightward) shift in the supply curve?
A. an increase in the price of labor input B. a reduction in the price of the good C. technological progress D. an increase in the number of consumers