The definition of cross elasticity of demand for two products X and Y is
A. percentage change in quantity of X demanded/percentage change in quantity of Y demanded.
B. percentage change in price of Y/percentage change in quantity of X demanded.
C. percentage change in price of Y/percentage change in price of X.
D. percentage change in quantity of X demanded/percentage change in price of Y.
Answer: D
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Pencils sell for 10 cents and pens sell for 50 cents. Suppose Jack, whose preferences satisfy all of the basic assumptions, buys 5 pens and one pencil each semester. With this consumption bundle, his MRS of pencils for pens is 3
Which of the following is true? A) Jack could increase his utility by buying more pens and fewer pencils. B) Jack could increase his utility by buying more pencils and fewer pens. C) Jack could increase his utility by buying more pencils and more pens. D) Jack could increase his utility by buying fewer pencils and fewer pens. E) Jack is at a corner solution and is maximizing his utility.
Refer to Figure 6.3. The situation pictured is one of
A) constant returns to scale, because the line through the origin is linear. B) decreasing returns to scale, because the isoquants are convex. C) decreasing returns to scale, because doubling inputs results in less than double the amount of output. D) increasing returns to scale, because the isoquants are convex. E) increasing returns to scale, because doubling inputs results in more than double the amount of output.
The opportunity cost of attending college might best be described as
A) the money that must be paid in order to attend college. B) the lowest-valued alternative use of the student's time. C) the highest-valued alternative use of the student's time. D) the value that the student attaches to not working.
Natural disasters like severe earthquakes are devastating to the economy as well as to the individuals harmed due to
A) supply shocks. B) demand shocks. C) demand-pull inflation. D) demand-pull deflation.