Which of the following causes an increase in demand for a normal good?
A. decrease in income
B. decrease in price
C. increase in the price of a substitute
D. increase in the price of a complement
Answer: C
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Given the market demand and cost data in the above figure, the existence of two firms equal sized firms producing a total of 8 million cubic feet of natural gas means that the long-run average cost of producing natural gas is
A) 10 cents per cubic foot. B) 20 cents per cubic foot. C) 30 cents per cubic foot. D) 40 cents per cubic foot.
Proponents of ISI assumed that governments
A) were capable of identifying and correcting market failures. B) were capable of identifying and correcting the excesses of economic populists. C) should enact orthodox stabilization plans. D) could control the terms of trade. E) Both A and D.
In general, firms will produce at a rate of output such that marginal revenue equals marginal cost because this output rate will
a. bring total revenue into equality with total cost. b. maximize the difference between the revenue received from the last unit and the cost incurred in producing the last unit. c. result in the lowest possible average total costs of production. d. maximize the firm's profit.
You value your favorite shirt at $100. Someone else values it at $80, and that person is willing to pay you $80 for your shirt. Would selling your shirt to this person for $80 be Pareto efficient?
A. No, the person paid you $80 for the shirt so his net benefit was $0, while your net benefit was -$20. For this change to be Pareto efficient, each of you should have the same net benefit. B. Yes, because any time you engage in trade, the result must be Pareto efficient. C. Yes, because even though you lose from the trade and he gains, there is the potential for him to compensate you for your loss. D. No, because both of you are not better off as a result of the trade.