If the price elasticity of demand for a good is 0.45, it is most likely that the good
a. has many close substitutes
b. is a luxury good
c. is high-priced
d. is a complementary good
e. has a demand curve that is price inelastic
E
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Why is a production possibilities frontier bowed out (concave)?
A) The bowed shape reflects constant opportunity cost. B) The bowed shape reflects decreasing opportunity cost. C) The bowed shape indicates that opportunity cost at first decreases at a decreasing rate, and then begins to decrease at an increasing rate. D) The bowed shape indicates that opportunity cost at first increases at a decreasing rate, and then begins to increase at an increasing rate. E) The bowed shape reflects increasing opportunity cost.
Marginal utility is measured by the maximum amount of money a consumer is willing to pay for one more unit of a commodity.
Answer the following statement true (T) or false (F)
A socially optimal price:
A) maximizes consumer surplus and minimizes producer surplus. B) maximizes producer surplus and minimizes consumer surplus. C) maximizes total surplus. D) maximizes deadweight loss.
Figure 5-3
Assume the market consists of three consumers with the demand curves in Figure 5-3. At a price of 1, the total market demand is
A. 40. B. 80. C. 140. D. 150.