Which of the following statements concerning efficiency is correct?
A. If a toll road is heavily used so that traffic movement is slowed, the price per vehicle should be reduced since the road is generating more revenue.
B. Economists advocate high prices for abundant resources and low prices for scarce resources.
C. If a toll road is heavily used and traffic movement is difficult, the price per vehicle should be increased to shift some traffic to less-crowded roads.
D. All of these options are desirable in promoting efficient use of scarce road space.
Answer: C
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Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. For Pat to earn normal profit, Pat's accounting profit would have to be ________.
A. 0 B. $35,000 C. $50,000 D. $15,000
Citicorp charges an 11 percent interest rate on all new car loans. If the inflation rate is 6 percent, Citicorp receives a real interest rate of
A) 11 percent. B) 6 percent. C) 1.83 percent. D) 0.54 percent. E) 5 percent.
In setting their prices, price searcher firms ignore
A) demand. B) marginal cost. C) the prices of competitors. D) all of the above. E) none of the above.
If the nominal interest rate is 6% and the inflation rate is 3%, the real interest rate is
a. 2% b. 3% c. 6% d. 9%