If the price elasticity of demand for a good is 6, then a 3 percent decrease in price results in
a. a 20 percent increase in the quantity demanded.
b. an 18 percent increase in the quantity demanded.
c. a 2 percent increase in the quantity demanded.
d. a 1.8 percent increase in the quantity demanded.
b
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Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and at the price level of 100 current aggregate demand is $1,200. If the government moves the economy back to the full-employment level of output by increasing taxes by $50, then the expenditures multiplier equals
A. 2. B. 10. C. 5. D. 4.
A risk-preferring person is willing to pay
A) a risk premium. B) a fee to make a fair bet. C) to obtain decreasing marginal utility. D) None of the above.
If the government's provision of a subsidy is too large to counteract the entire effect of a positive externality, the:
A. quantity consumed will become even lower. B. quantity consumed will become too high. C. total surplus will be maximized. D. None of these statements is true.
A negative externality or spillover cost (additional social cost) occurs when
A. the price of the good exceeds the marginal cost of producing it. B. the total cost of producing a good exceeds the costs borne by the producer. C. firms fail to achieve allocative efficiency. D. firms fail to achieve productive efficiency.