For most goods, the real-income effect of a price change is
A) small because the good accounts for a small part of the consumer's budget.
B) small because the decision to buy a good depends only on the income of a consumer.
C) large because the price of the good is in terms of the currency and the income of the person is also in terms of the currency.
D) zero because the real-income effect only applies to durable goods.
Answer: A
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American Airlines makes numerous nonstop flights from Chicago's O'Hare Airport to the airport at Dallas-Fort Worth. The distance between those two cities is 1,000 miles. The only variable cost, fuel, costs $.06 for each passenger-mile it flies. Bob, on his way to an emergency business meeting, buys a ticket in coach class for $1,300 at the very last minute. The marginal cost of flying Bob from
Chicago to Dallas-Fort Worth is: a. b and e. b. higher than the average cost of previous passengers. c. $600. d. $160. e. $60.
If MPC = 0.8 and the economy is in equilibrium $500 below full-employment equilibrium, how much should government spending change to achieve full employment?
a. ?100. b. +80. c. ?80. d. +500. e. +100.
If input prices for perfectly competitive firms increase as the output of its industry expands: a. their short run average cost curves will shift up as the industry expands
b. after a permanent increase in demand, the long run equilibrium price will be higher than the original price. c. after a permanent increase in demand, the short run equilibrium price will be higher than the eventual long run equilibrium price. d. all of the above will be true.
Money coming into a business is called ________. Examples include tickets, broadcast contracts, concessions, and sponsorships.
a. profit b. expenses c. revenue d. income e. debt