Suppose that the percentage change in demand is 10%, the price elasticity of supply is 2, and the percentage change in the equilibrium price is 3.33%. What is the price elasticity of demand?
A. 0
B. 1
C. 2
D. 3
Answer: B
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A picture frame company operates in a monopolistically competitive market. Its short-run equilibrium price is $80 and its ATC is $65 . It sells 100 picture frames a week. From this we can tell:
a. this firm is making a normal profit. b. other picture frame companies will want to exit the market. c. there are no other picture frame companies in the area. d. economic profits are $1,500. e. total profits are being maximized.
When new firms enter a competitive price-taker market,
a. economic profits of existing firms will continue to be zero. b. entering firms will earn zero economic profit upon entry into the market. c. existing firms may see their costs rise as more firms compete for limited resources. d. prices will rise as existing firms raise prices to keep new firms out of the market.
The "housing bubble" discussed in the text book refers to:
A. housing prices rising much more quickly than the rest of prices in the economy. B. housing prices within a certain area of the U.S. rising disproportionately with the rest of houses in the economy. C. an unexplained increase in the demand for houses which caused the prices of houses to rise. D. a supply shock to the housing market, which caused housing prices to increase.
In order of their occurrence, the phases of the business cycle are:
A. peak, downturn, trough, upturn. B. peak, upturn, downturn, trough. C. peak, downturn, upturn, trough. D. peak, upturn, trough, downturn.