Which of the following would tend to DECREASE the elasticity of demand for good X?
A. The cost of producing X decreases.
B. Several firms which used to produce substitutes for X go out of business.
C. Consumers begin spending a smaller percentage of their income on X.
D. both b and c
E. all of the above
Answer: D
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Refer to Figure 12-7. If the market price is P2 the firm
A) will make a profit and produce a quantity of Q2. B) will break even and produce a quantity of Q2. C) will make a profit and produce a quantity of Q1. D) will make a profit and produce a quantity of Q3.
A consumer's willingness to trade one good for another can be expressed by the consumer's
A) indifference curve. B) marginal rate of substitution. C) Both A and B above. D) None of the above.
The Keynesian zone of the SRAS curve is on the far:
a. right, which is relatively flat. b. left, which is relatively steep. c. left, which is relatively flat. d. right, which is relatively steep.
Government failure is likely to occur for all of the following reasons except:
A. intervention in markets is always simpler than it initially seems. B. special interest groups might lobby government to the detriment of the public good. C. the bureaucratic nature of government intervention does not allow fine-tuning. D. individuals have better information about a situation that affects them than does government.