Augi sells 300 cat toys each month when the price is $5 per toy. When Augi lowered the price to $4, she sold 400 toys. The price elasticity of demand over the $4 to $5 range is approximately:
A. 0.78 and inelastic.
B. 1.29 and inelastic.
C. 1.29 and elastic.
D. 0.78 and elastic.
Answer: C
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Kevin is re-finishing an antique grandfather clock that he purchased at a flea market for $300. He expects to be able to sell the clock for $450
At the last minute, Kevin discovers that he needs to repair the gears at a cost of $175 to make the clock worth $450 to potential buyers. It turns out that he could also sell the clock now, without completing the additional repairs, for $250. What should Kevin do? A) He should sell the clock now for $250. B) He should keep the clock but not make the repairs since the original $300 is a sunk cost. C) He should complete the additional repairs and sell the clock for $450. D) He should keep the clock after making the repairs since it is not rational to spend a total of $475 on an item that can only be sold for $450. E) Kevin is indifferent between selling the clock as is or selling it after completing the repairs.
A small business owner who is earning a positive economic profit, no matter how small, is doing better than if he or she sold his or her business and went to work for another firm.
Answer the following statement true (T) or false (F)
In the short-run macro model, adjustment toward equilibrium is facilitated by price changes
a. True b. False
A country will have a balance-of-payments deficit when its exchange rate:
A. is flexible. B. is overvalued. C. equals the market equilibrium value. D. is undervalued.