Explain how information products are "special."
What will be an ideal response?
Producing an information product entails incurring relatively high fixed costs, but once the first unit is produced, a firm can produce additional units at a constant and relatively low unit cost. Consequently, producers of information products experience short-run economies of operation, because their short-run average total cost curves slope downward. Furthermore, the constant marginal cost is always less than average total cost, so marginal cost pricing would result in economic losses for these firms. In the long-run equilibrium for monopolistically competitive producers of information products, price and average total cost are equal, so the firms earn revenues just sufficient to cover the relatively high fixed costs of developing the first unit of their products, plus the relatively low variable costs of selling additional units.
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How does an increase in the price level affect the aggregate planned expenditure curve and the aggregate demand curve?
What will be an ideal response?
The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the
A) consumers would pay more of the tax. B) producers would pay more of the tax. C) tax would be equally shared by the consumers and the producers. D) consumers would pay the entire tax because their demand is less elastic than the producers' supply.
A firm's economic profit is the difference between its total revenue and total costs, including the opportunity costs of the resources used in the business
a. True b. False Indicate whether the statement is true or false
Which of the following is an example of a U.S. export of services?
a. a Canadian buys a Ford automobile that was produced in the United States b. a U.S. traveler buys an Irish knit sweater made in Ireland c. a British citizen buys an American Airlines ticket from London to New York d. a U.S. citizen puts money into a French money market account e. a Japanese exchange student buys a Big Mac while attending college in California