If a 10 percent increase in the price of gasoline results in a 2 percent decrease in the quantity demanded of gasoline, then the elasticity of demand for gasoline is:
a. equal to 0.2 and demand is inelastic.
b. equal to 0.2 and demand is elastic.
c. equal to 0.02 and demand is elastic.
d. equal to 0.5 and demand is inelastic.
e. equal to 0.5 and the demand is elastic.
a
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There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb?
What will be an ideal response?
In the spring of 1994, Northwest Airlines took the independent action of reducing fares on its flights. Other competing airlines quickly matched the fare cuts. These actions might be interpreted as:
A) a noncooperative game. B) a cooperative game. C) a constant sum game. D) a competitive game.
A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?
a. average revenue exceeds marginal revenue b. marginal revenue equals marginal cost c. price exceeds marginal cost d. All of the above are correct.
Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Which of the following gives the market-clearing curve for cereal?
A. Pc = 100 - (Pm/10) B. Pc = 8 - (Pm/10) C. Pc = 10 - (Pm/10) D. Pc = 10 + (Pm/10)