Recall the Application about the short-run and long-run elasticity of supply of coffee to answer the following question(s). Recall the Application. If the price of coffee beans increases by 20 percent and stays there for a year, the quantity of coffee supplied will ________ by a relatively ________ amount.
A. increase; large
B. increase; small
C. decrease; large
D. decrease; small
Answer: B
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Suppose people had been paying $10 for a pizza at Little Weezer's. If their demand increases to the point where they will now pay $15 for the same pizza, then
A) the marginal cost of making pizzas would tend to increase. B) the quantity supplied of pizzas would tend to increase. C) both A and B are true. D) none of the above are true.
Firms can make decisions using marginal analysis even if they do not know the shape of a demand curve.
Answer the following statement true (T) or false (F)
If price were lowered from $10 to $8 and quantity demanded rose from 50 to 51, calculate elasticity; state whether demand is elastic, unit elastic, or inelastic; and find how much total revenue was when price was $10 and $8.
What will be an ideal response?
An assumption of the classical model is that
A. money illusion is widespread. B. people make decisions based on nominal prices rather than real prices. C. people are motivated by self-interest. D. prices are flexible while wages are inflexible.