Suppose that a 20% increase in the price of product X generates a 15% increase in the quantity of X supplied. The price elasticity of supply for good X is
A. less than 1 and therefore supply is inelastic.
B. positive and therefore X is a normal good.
C. negative and therefore X is an inferior good.
D. more than 1 and therefore supply is elastic.
Answer: A
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Suppose the government abolished the minimum wage law and the law that requires union wage rates to be paid on all government contract jobs. We would expect to see
A) a recession. B) the duration of unemployment to increase. C) a decline in the natural rate of unemployment. D) an increase in claims for unemployment benefits.
The relationship between real GDP and potential GDP is that
A) real GDP always equals potential GDP. B) real GDP never equals potential GDP. C) real GDP fluctuates about potential GDP. D) real GDP is always below potential GDP.
If Greece chose to abandon the euro and the Greek government decided to exchange euro bank deposits for drachmas, the affected bank depositors would experience gains if the
A) euro then appreciated. B) euro then depreciated. C) drachma then appreciated. D) drachma then depreciated.
It has been argued that a monopolistically competitive industry involves "waste" because
A) there is too much product differentiation making shelves too crowded. B) they end up producing to the right of the minimum of the average total cost curve and the price is below the marginal cost. C) the firms do not equate marginal cost to marginal revenue to find the profit maximizing price and output. D) the firms do not produce at the minimum of the average total cost curve and price is above marginal cost.