Assume Pyrotex Inc. estimates the demand for its fireworks to be linear. If the current price charged by Pyrotex is such that the elasticity of demand is equal to 2.5, which of the following statements is true?
A. Pyrotex cannot increase its revenues by changing the price of fireworks.
B. Pyrotex will increase its revenues by decreasing the price of fireworks.
C. Pyrotex will increase its revenues by increasing the price of fireworks.
D. Not enough information is provided to determine whether or not Pyrotex is currently maximizing its revenues.
Answer: B
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Which one of the following will shift the consumption function downward?
a. An increase in disposable income. b. A decrease in disposable income. c. Legislation making credit harder to obtain. d. Lower tax rates. e. A technological breakthrough.
Which one of the following statements is TRUE?
A. The investment function is positively sloped to reflect the fact that lower interest rates cause more firms to expand their operations. B. The investment function is positively sloped to reflect the fact that higher interest rates cause more people to invest their funds. C. Along a given investment function, lower interest rates result in more investment projects being undertaken. D. Along a given investment function, higher interest rates result in more investment projects being undertaken.
Which of the following goods is an example of a good that is nonexcludable but not nonrivalrous?
a. National defense. b. A fishing lake. c. A lighthouse. d. A radio broadcast.
Expansion in the size of government relative to the market sector will eventually retard economic growth because
a. larger governments will be more involved in activities for which they are ill-suited. b. the higher taxes to finance a bigger government will lead to larger and larger deadweight losses from taxation. c. the incentive to engage in innovative activities and respond to change is weaker in government than in the market sector. d. all of the above are correct.