Suppose a bumper wheat crop results in a 40 percent increase in output and sales, while the price elasticity of demand for wheat is about 0.8. Ceteris paribus, prices should
A. Rise by 8 percent.
B. Rise by 50 percent.
C. Fall by 8 percent.
D. Fall by 50 percent.
Answer: D
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If a firm in the long run produces less than its efficient scale, it
A) should raise its markup to increase its profit. B) should lower its markup to increase its profit. C) cannot be a perfectly competitive firm. D) should not advertise to increase its profit. E) must have its markup equal to zero.
George spends all his income on sandwiches and juice. George's utility is maximized when he is consuming sandwiches and juice so that the
A) marginal utility from sandwiches equals the marginal utility from juice. B) total utility from sandwiches equals the total utility from juice. C) marginal utility per dollar spent on sandwiches equals the marginal utility per dollar spent on juice. D) marginal utility from sandwiches is at a maximum.
For demand to exist, there must be
a. a desire and an ability to buy. b. a supply of the product in the market. c. a price that is low enough to permit all consumers to afford the product. d. All of these.
Refer to the diagram. At output level Q 1:
A. resources are overallocated to this product and productive efficiency is not realized.
B. resources are underallocated to this product and productive efficiency is not realized.
C. productive efficiency is achieved, but resources are underallocated to this product.
D. productive efficiency is achieved, but resources are overallocated to this product.