Say the bus authority in your city increased the typical bus fare from $1.00 to $1.50 and that due to this increase total revenue increased by 20%. Based on this we know that the price elasticity of bus rides in your neighborhood is (assume demand curve is linear):
A. 0.4.
B. 0.8.
C. 1.5.
D. 1.
Answer: A
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A substitution effect of a price change is represented by:
A) movement along the same indifference curve. B) movement to a different indifference curve. C) a change in the initial budget line to a new budget line. D) a change in the slope of the initial budget line.
If the costs of negotiating and enforcing contracts are _____ relative to the benefits, buyers and sellers have incentives to make economically efficient arrangements that _____ value
a. high; increase b. low; increase c. high, decrease d. low; decrease
The marginal product of labor is equal to the
a. incremental cost associated with a one unit increase in labor. b. incremental profit associated with a one unit increase in labor. c. increase in labor necessary to generate a one unit increase in output. d. increase in output obtained from a one unit increase in labor.
The figure below represents the domestic market for wheat in a small country. Imports of wheat are prohibited.
With an export subsidy of $20 per bushel, the consumption effect of the export subsidy amounts to
A. $300 million. B. $200 million. C. $2.2 billion. D. $1 billion.