Which of the following happens to the demand for coffee when the price increases?
a. It stays the same.
b. It decreases.
c. It increases
d. It fluctuates.
b. It decreases.
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Automobile manufacturers commonly sell new car models at the full suggested retail price during the first few years the car is on the market, and they do not offer rebates or discounts
After the initial sales period, the manufacturers typically offer rebates or discounts on these models. The marginal cost of manufacturing the cars is constant across time. Which of the following statements is true? A) The firms practice peak-load pricing by charging a higher price in the initial sales period. B) Early buyers have higher reservation prices for the new models, and the manufacturers maximize profits by charging these buyers a higher price. C) The marginal revenue from buyers who purchase these cars after the initial sales period must be lower that the marginal revenue from early buyers. D) To maximize profits, the firms equate the buyers' reservation prices across time.
In an economy in which decisions are guided by prices and individual self-interest, there is
a. the potential to achieve efficiency in production. b. a strong need for government intervention in the market. c. less efficiency than would be observed in a centrally-planned economy. d. more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.
Suppose that a monopolistically competitive firm is currently producing at the point where marginal revenue equals marginal cost and is not covering the variable cost of producing the last unit. In this situation, economic theory would predict that the firm will:
a. raise prices in order to lessen the amount of the loss. b. collude with other producers. c. exit the industry. d. be able to switch to a point of profitability by producing where price equals marginal cost.
Explain why the demand for a particular brand of fast food tends to be more elastic than demand for all fast food.
What will be an ideal response?