If a monopolistically competitive firm raises its price, it
a. loses all of its customers (sales drop to zero)
b. loses some, but not all, of its customers
c. loses very few customers
d. loses no customers at all
e. gains customers (sales increase)
B
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The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded?
A) 40 percent B) 25 percent C) 2.5 percent D) 0.4 percent
The net change in quantity demanded of a good following a price change
a. is equivalent to the substitution effect b. is equivalent to the income effect c. must decrease as marginal utility rises d. is negative only when the income effect is negative e. reflects both the substitution and income effects
Which of the following is the most likely response to an increase in the U.S. real interest rate?
a. a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing b. U.S. firms decide to buy more capital goods c. a U.S. citizen decides to put less money in his savings account than he had planned. d. All of the above are consistent.
We define autonomous expenditure to be expenditure that:
A. is unaffected by the current level of income in the economy. B. that changes under the guidance of the government. C. depends on how much income changes in the economy. D. people make that pertains to the auto industry.