The local barber in a small town has decided to raise the price of his haircuts by 25% because he realizes he is the only barber in town and of course "everyone has to get a haircut"
His rational is that the demand for his services is price inelastic? What mistake is he making?
The mistake that he is making is that he is ignoring possible substitutes right where he lives and works. A 25% increase in the price of haircuts may induce many people to start cutting their hair at home and have their parents or spouses do it for them.
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In one hour John can produce 20 loaves of bread or 8 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is true?
A) Phyllis has a comparative advantage in producing bread. B) John has a comparative advantage in producing cakes. C) Phyllis has an absolute advantage in both goods. D) John has an absolute advantage in both goods. E) Phyllis has a comparative advantage in producing both cakes and bread.
Which of the following is an example of a "damaged goods" strategy
a. A supermarket offers free parking space but charges higher for groceries b. A television reseller spends time making sure that the picture quality of the bargain priced sets is fuzzy c. A gift store hikes up the prices on gift wrapping services during its seasonal sale d. All of the above
Which of the following is an example of consumption?
a. Fender Corp. buys a new robot for its automobile factory. b. Karabo buys cheese at a store for her dinner. c. Joe’ s Hardware buys a new cash register. d. Cook County buys a new printer for office use.
Why are all costs really "opportunity costs"? What is an opportunity cost of attending class?
What will be an ideal response?