Private schools are able to exclude students from attending classes they offer unless students have been accepted and paid tuition and fees. This suggests that education is
A) subject to the principle of rival consumption.
B) subject to the free-rider problem.
C) not subject to the exclusion principle.
D) a public good.
Answer: A
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A 10 percent decrease in the price of a Pepsi decreases the demand for a Coca-Cola by 50 percent. The cross elasticity of demand between a Pepsi and Coca-Cola is
A) 50. B) 10. C) 5. D) 0.20.
An airline can easily move its aircraft from one route to another. One interpretation of this is that the airline industry is an example of a contestable market.
Answer the following statement true (T) or false (F)
Moving downward on a downward sloping linear demand curve, the absolute value of the price elasticity of demand
A) is constant. B) increases continuously. C) decreases continuously. D) may either increase or decrease.
Suppose stock A sells for $30 per share and pays dividends of $1 per share per year. Stock B sells for $40 per share and pays dividends of $2 per share per year. Through the process of arbitrage, we would expect the price of:
A. stock A to fall and/or the price of stock B to rise. B. stock A to rise and/or the price of stock B to fall. C. both stocks to rise or fall together. D. neither stock to change.