Answer the following questions true (T) or false (F)
1. An inferior good is a good for which the quantity demanded increases as the price decreases, holding everything else constant.
2. The substitution effect explains why there is an inverse relationship between the price of a product and the quantity of the product demanded.
3. If consumers believe the price of hybrid vehicles will decrease in the future, this will cause the demand for hybrid vehicles to decrease now.
1. FALSE
2. TRUE
3. TRUE
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________-term forecasts are more valuable if a firm's demand changes very frequently and changes in the firm's output level have a ________ effect on its marginal cost.
A) Long; small B) Short; large C) Long; large D) Short; small
Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect
a. the demand for honey to increase b. the demand for honey to decrease c. the quantity demanded of honey to decrease d. the price of honey to decrease e. the quantity demanded of honey to increase
Suppose a company that produces mouthwash branches out into producing toothpaste. If this expansion reduces the average cost per unit, the company must
a. benefit from vertical integration b. benefit from horizontal integration c. experience economies of scale d. experience economies of scope e. have no transaction costs
An increase in the supply of the product implies:
a. producers will now charge a higher price for a given quantity of output. b. the supply curve will shift to the left. c. some producers are dropping out of this market. d. producers will now charge a lower price for a given quantity of output. e. the price of this product has increased.