Which of the following statements is correct?
A. Slope is the ratio of the vertical change (the rise or fall) to the horizontal change (the run).
B. A direct relationship is one in which two variables change in the opposite direction.
C. An inverse relationship is one in which two variables change in same directions.
D. An independent relationship is one in which two variables are upward sloping.
Answer: A
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Suppose that the local utility regulators have recently approved an increase in the price of electricity from 10¢ per kilowatt-hour to 10.5¢ per kilowatt-hour. The long-run price elasticity of demand for electricity is estimated to be -1.2.
(i) By how much will the quantity demanded of electricity drop in the long run because of this price increase? (ii) When the price of electricity increases, will consumers' total expenditures on electricity rise or fall in the long run? (Hint-Consider which is larger, the percentage increase in price or the percentage decrease in quantity demanded.) (iii) The cross elasticity of demand for electricity with respect to natural gas is 0.2. By how much would the price of natural gas have to change to totally offset the effect that the price increase in electricity has on the quantity of electricity consumed? In other words, by how much would the price of natural gas have to change to cancel out the fall in the quantity demanded that you calculated in part i?
There are 30 firms in an industry. What happens to that industry's four-firm concentration when the third- and fourth-largest firms merge?
A) Nothing, because their shares are already included in the concentration calculation. B) The industry's concentration ratio will fall. C) The industry's concentration ratio will increase. D) It is impossible to know without more information.
Mr. Jones pays his employees by the hour. He believes they purposely work slowly to maximize their personal satisfaction. What can he do to provide them with a stronger incentive to work efficiently?
The basic principles of economics suggest that
a. markets are seldom, if ever, a good way to organize economic activity. b. government should become involved in markets when trade between countries is involved. c. government should become involved in markets when those markets fail to produce efficient or fair outcomes. d. All of the above are correct.