If the absolute price elasticity of demand is equal to 1 in the short run, then in the long run, other things being equal, the absolute price elasticity of demand will be
A) less than one.
B) less than zero.
C) greater than one.
D) equal to zero.
Answer: C
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When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to
A) shift the demand curve for competing firms to the right. B) create a perfectly competitive market in which to sell its credit card. C) create a barrier to entry for competing firms. D) convince customers that its card has greater value than those offered by rival firms.
High net worth helps to diminish the problem of moral hazard problem by
A) requiring the state to verify the debt contract. B) collateralizing the debt contract. C) making the debt contract incentive compatible. D) giving the debt contract characteristics of equity contracts.
Which of the following is an example of a positive externality? ?
A. ? A firm emits pollution into the air, harming members of society. B. ?An auto body shop makes a lot of noise, reducing the property values of nearby homes. C. ?A coastal dairy farmer's undeveloped land offers unimpeded views of the ocean for a nearby neighborhood. D. ?You go to a store and pay $0.65 for a candy bar that you then eat.
To test their theories, economists usually have to
A. conduct experiments that involve people who do not behave rationally. B. set up careful laboratory experiments with all variables controlled. C. first examine theory and compare it with what happened in the past in the real world. D. use only models that have a proven record of success.