Suppose that the elasticity of demand for hamburgers is 2.5 and price decreases by 14%. By what percentage will quantity demanded for hamburgers increase?
A. 2.5%
B. 5.6%
C. 25%
D. 35%
Answer: D
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Suppose that, in the short run, a perfectly competitive firm earns a normal profit. Which of the following is incorrect?
a. MR = price b. MR = ATC c. AR ? Q = TR d. TR = TC e. P = AVC
In the short run, the profit maximizing (or minimizing) quantity of output for any firm to produce exists at that output level at which marginal revenue equals marginal cost
a. True b. False Indicate whether the statement is true or false
When economists describe the theory of consumer choice, they
a. portray people as simple and methodical with perfectly predictable patterns of behavior. b. assert that consumer's decisions are based on which goods and services give them the greatest utility within their limited incomes. c. point out that consumers rarely consider utility in their purchase decisions; they look at other factors like convenience, peer behavior, and price. d. assert that the retail price is the only variable consumers really consider in making their purchasing decisions. e. admit that consumer behavior is random and there is no credible economic theory to explain the phenomenon.
Answer the following statements true (T) or false (F)
1. Minor cycles have fluctuations which are noticeable and severe. 2. The measurement of a business cycle is obtained by adjusting the real GDP for seasonal variation, the trend, and random fluctuations. 3. Since the Great Depression, business cycles have not been an issue in the United States. 4. A hurricane is considered an external force in business cycle analysis. 5. The period when the level of business activity has dropped as far as it is going to drop in a particular business cycle is known as the trough.