If average movie ticket prices rise by about 5 percent and attendance falls by about 2 percent, other things being equal, the elasticity of demand for movie tickets is about:
A. 2.5.
B. 0.4.
C. 0.0.
D. 0.6.
Answer: B
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As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The resulting substitution bias problem causes the CPI to:
a. overstate the impact of higher prices on consumers. b. consistently underestimate the true inflation rate. c. omit the benefits of product quality improvements. d. have larger fluctuations than other price indexes.
The law of comparative advantage suggests that
a. curtailing U.S. trade with other countries would make U.S. consumers better off. b. everyone would be better off if they were self-sufficient. c. countries will tend to import commodities that they can produce at a relatively low opportunity cost. d. countries will tend to import commodities that they can produce at a relatively high opportunity cost.
The actual burden of a tax is determined primarily by
a. the elasticities of demand and supply. b. the legal (or statutory) assignment of the tax. c. the number of exchanges that are eliminated from the market as a result of the tax. d. none of the above.
The Federal Reserve can alter the size of the money supply by changing reserves or changing reserve requirements
a. True b. False Indicate whether the statement is true or false