If the elasticity of demand for the latest American Idol album is 1.4, this means
A. few substitutes for the American Idol album exist.
B. a 10% decrease in the price leads to a 140% increase in quantity demanded.
C. a 5% increase in the price leads to a 7% decrease in quantity demanded.
D. a 1% increase in the price leads to a 14% decrease in quantity demanded.
Answer: C
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Firms are better off using rebates rather than just lowering the price of a good because
A) people view the firm in a positive light because now poorer people will be able to afford their good. B) customers overestimate the value of the rebate and so buy more of the good, making profits higher than if they just lowered the price. C) only those who place a low value on their time or are price sensitive actually redeem the rebate, making profits higher than if they just lowered the price. D) lowering the price is inefficient and creates additional deadweight loss.
Forms of federal taxation used to finance the war did not include:
a. the income tax. b. the corporate tax. c. the excess profits tax. d. sales tax.
In a command economy, the basic economic questions are answered by:
a. central authority. b. None of the answers are correct. c. individual buyers and sellers. d. the traditional methods.
An export subsidy raises the domestic price of the product.
Answer the following statement true (T) or false (F)