Suppose that the elasticity of demand for a product is 4.0 and quantity demanded increases by 20%. What must the percentage decrease in price have been?
A. 5%
B. 20%
C. 80%
D. 200%
Answer: A
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The earned income tax credit (or EITC):
A. reduces the sales tax paid by low-income workers. B. provides tax credits to firms who hire low-income workers. C. gives low-income workers credits on their federal income taxes. D. reduces the tax rate on investment income.
If we compare the last 30 years of inflation as recorded by the CPI and the PCE price index, we find that the
A) two measures fluctuate together. B) CPI inflation rate has consistently been at least 5 percentage points above the PCE price index inflation rate. C) PCE price index inflation rate has consistently been at least 5 percentage points above the CPI inflation rate. D) two measures give very different inflation rates for most years. E) the CPI inflation rate was always positive, but the PCE price index inflation rate was frequently negative.
Refer to Figure 4-4. At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an economically efficient quantity?
A) Yes, because $18 shows what consumers are willing to pay for the product. B) No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit. C) Yes, otherwise consumers would not buy 40 units. D) No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit.
The total revenue of a purely competitive firm from 8 units of output is $48. Based on this information, total revenue for 9 units of output must be:
A. $52 B. $54 C. $58 D. $60