The pizza delivery industry is monopolistically competitive. Little Joe's Pizzeria raises its prices by 10%, but all the other pizzerias in town keep their prices the same. Which of the following is most likely to occur?
A. Little Joe's Pizzeria will lose some of its customers.
B. Little Joe's Pizzeria will not be able to sell any pizzas, because it was the only firm to raise its price.
C. Little Joe's Pizzeria's profits will increase.
D. The number of customers served by Little Joe's Pizzeria will increase.
Answer: A
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An externality is
a. always a benefit to the recipient b. always a detriment to the recipient c. an activity that occurs in a business that is unknown to management d. an unintended benefit or cost imposed on third parties resulting from market activity e. an act, caused by a firm located in this country, that has an effect on a person in a foreign country
Which of the following is not a likely consequence of inflation?
a) Firms incur the “menu costs” of changing advertisements b) Some taxpayers are pushed into higher tax brackets c) The value of currency is reduced d) Banks reduce nominal interest rates to reflect expected inflation e) Price signals sent by consumers to firms are distorted
With a nominal interest rate of 5%, the present discounted value of $100 to be received in two year is
A) $90.00. B) $90.70. C) $95.23. D) $110.00.
Suppose a lawn-mowing business has a mower for which it paid $1000 and workers for which they pay $10 per hour. Suppose each mower can mow a lawn per hour.
A. Their total fixed cost is $1000/lawns mowed. B. Their total fixed cost is $10 per lawn mowed. C. Their variable cost per lawn is $10 + $1000/lawns mowed. D. Their total fixed cost is $1000.