You spend $150 every month planting flowers in your front yard. Your neighbor has told you that she derives $20 a month in enjoyment from being able to look at your beautiful flowers. Which of the following is true?
A. If you took into consideration the benefits your neighbor derived, the efficient level of flower planting would be less than $150 a month.
B. You should refuse to spend anything on flowers unless your neighbor pays you $20 a month.
C. You are spending too much on flowers, because your neighbor derives only $20 worth of benefits.
D. If you took into consideration the benefits your neighbor derived, the efficient level of flower planting would be greater than $150 a month.
Answer: D
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The first law of demand states that
a. the quantity demanded increases as price falls b. the quantity demanded decreases as price falls c. the quantity demanded increases as price increases d. none of the above
What is the cross-price elasticity of demand? How is it measured?
Inelastic demand creates an incentive for suppliers to:
A. stop producing altogether. B. compete with each other and increase quantity supplied. C. try to get together and increase quantity supplied. D. try to get together and limit quantity supplied.
Monetary and price instability will
A) encourage domestic citizens to increase their rate of saving. B) encourage businesses to invest and expand their future output. C) make it easier for both individuals and businesses to plan wisely for the future. D) generate uncertainty, and encourage investors and businesses to move their activities to countries with a more stable monetary environment.