The bus company in Detroit found that when it reduced its price in order to get more people to use the bus—and more people did—the bus company's total revenue still remained the same. Why did they get this surprising result?
a. The demand curve was horizontal, reflecting a price elasticity of zero.
b. The demand curve was vertical, reflecting a price elasticity of zero.
c. The demand curve
shifted to the right.
d. The price elasticity within the range of price-before-the-cut and price-after-the-cut was unit elastic.
e. The price cut was insufficient. A deeper cut would have increased total revenue.
D
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Suppose firms in Hong Kong can produce 40,000 plastic dolls or 80,000 squirt guns each week, while firms in Taiwan can produce 40,000 plastic dolls or 40,000 squirt guns each week. Therefore, when we compare the two groups:
A) the costs of production are the same in each country. B) the people in Hong Kong are the most efficient producers of both plastic dolls and squirt guns. C) the people in Taiwan produce plastic dolls with the same efficiency as Hong Kong. D) none of the above are true.
In many cities, the market for cab services is monopolized. This monopoly arises because:
a. of economies of scale. b. of government restrictions on the entry of new firms. c. there is a limited space on the streets for taxis. d. it protects the consumers from unscrupulous drivers. e. of high fixed costs of entering the business.
Governments have learned that a(n)
a. increased budget deficit tends to reduce interest rates and increase investment, thus increasing the growth of the capital stock b. reduced budget deficit tends to reduce interest rates and increase investment, thus increasing the growth of the capital stock c. reduced budget deficit tends to increase interest rates and increase investment, thus increasing the growth of the capital stock d. reduced budget deficit tends to increase interest rates and increase investment, thus reducing the growth of the capital stock e. increased budget deficit tends to increase interest rates and increase investment, thus reducing the growth of the capital stock
Erbia can produce both corn and wheat using fewer inputs than Glassen; however, Glassen can produce corn at a lower opportunity cost than Erbia. Therefore, we can conclude that Glassen has a comparative advantage in wheat production
a. True b. False Indicate whether the statement is true or false