Two stores—Lazy Guys and Ralph's Recliners—are located in the same city
Both stores buy recliner chairs from the same manufacturer at the same price and both stores are about the same size, so that the fixed costs of production for both stores are the same. Ralph's Recliners sells more recliners per month and Ralph's has a lower average total cost of production. Which of the following can explain why the average total cost of production is lower for Ralph's Recliners?
A) The rent Lazy Guys pays for its building is greater than the rent paid by Ralph's Recliners.
B) Ralph's explicit costs are less because Ralph owns the land on which his building is located. Lazy Guys must make lease payments for the land on which its store is located.
C) The price of recliners charged by Ralph's is greater than the price charged by Lazy Guys.
D) Because Ralph's Recliners sells more output its average fixed costs are lower than Lazy Guys' average fixed costs.
D
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An example of an aggregate supply shock is
A) the cutoff of oil by the OPEC nations in the early 1970s. B) inflation caused by a surge in demand. C) the increase in the labor force due to the baby-boomer generation reaching working age. D) the increase in candy sales every February.
American Airlines makes numerous nonstop flights from Chicago's O'Hare Airport to the airport at Dallas-Fort Worth. The distance between those two cities is 1,000 miles. The only variable cost, fuel, costs $.06 for each passenger-mile it flies. Bob, on his way to an emergency business meeting, buys a ticket in coach class for $1,300 at the very last minute. The marginal cost of flying Bob from
Chicago to Dallas-Fort worth is a. $1300 b. higher than the average cost of previous passengers c. $600 d. $160 e. $60
Based on available information about the annual auctions for SO2 allowances
a. only the largest electric utilities are allowed to bid b. allowance prices have been much higher than predicted c. allowance prices are unrelated to energy prices d. prices of SO2 allowances are lower than originally anticipated
Which of the following is true?
A. At the same price, demand is more elastic on the steeper demand curve. B. On a linear demand curve, elasticity is constant. C. On a linear demand curve, the higher the price, the less elastic is demand. D. None are true.