Suppose the income elasticity of demand for used jet skis is 3.5. If the level of income decreases by 1 percent, the number of used jet skis sold will, ceteris paribus,
A. Rise by 0.29 percent.
B. Fall by 0.29 percent.
C. Rise by 3.5 percent.
D. Fall by 3.5 percent.
Answer: D
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Refer to Horizontal Merger. If area F + G is larger than area E, we can conclude that the horizontal merger
The following questions refer to the accompanying diagram, which shows the effects of a horizontal merger. Before the merger, the firm behaves competitively producing Q0 and charging P0. The merger lowers the firm's marginal cost and gives the firm enough market power to switch to the monopoly equilibrium.
a. will reduce economic efficiency.
b. causes both consumers' and producer's surplus to rise.
c. will not increase the firm's profit and thus will not be undertaken.
d. creates an increase in social gain.
The branch of economics that focuses on decision making for the economy as a whole is called:
a. normative economics. b. macroeconomics. c. microeconomics. d. consumer economics.
Santiago wants to buy some milk and a box of cereal. If he buys 2 quarts of milk at $1 per quart, the box of cereal costs 75 cents. If he buys 3 quarts of milk at $1 per quart, the box of cereal is free. For Santiago, the marginal cost of the third quart of milk is
a. zero. b. 25 cents. c. 75 cents. d. $1.
If the world price of apples is higher than Argentina's domestic price of apples without trade, then Argentina
a. should import apples. b. has a comparative advantage in apples. c. should produce just enough apples to meet its domestic demand. d. should refrain altogether from producing apples.