If a 10 percent rise in price leads to a reduction in quantity demanded of more than 10 percent,
a. demand is elastic.
b. demand is inelastic.
c. elasticity of demand is unitary.
d. None of the above is correct.
A
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Larry consumes at a point on his budget line where his marginal rate of substitution is less than the magnitude of the slope of his budget line. As Larry moves toward his consumer equilibrium point, he will move to a
A) lower budget line. B) higher budget line. C) lower indifference curve. D) higher indifference curve.
A firm practices input substitution when it
A. retrains Joe the welder as a painter and Pat the painter as a welder. B. buys extra machines for its workers to use. C. allows fixed cost to become variable. D. replaces unskilled labor with automated machinery.
Suppose you own a store that sells top-of-the-line MP3 players. You have determined that the demand function for your MP3 players is Qd = D(P) = 1200 - 4P. At what price would you sell the MP3 players if you wanted to sell 100 of them?
A. $250 B. $275 C. $280 D. $300
Refer to the graph below. Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. Suppose that there is economic growth which shifts AS1 to AS2. Because of the shift from AS1 to AS2, a monetarist following a monetary rule would call for an increase in aggregate demand such that the price level and quantity of real domestic output would be:
A. P4 and Q2
B. P3 and Q2
C. P2 and Q2
D. P1 and Q2