What happens when the price decreases in the case of a product that has elastic supply?
(A) Existing producers expand, and new producers enter the market.
(B) Some producers produce less, and others drop out of the market.
(C) New firms enter the market as older ones drop out.
(D) Existing firms continue their usual output, but they earn less.
Ans: (B) Some producers produce less, and others drop out of the market.
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Until the early 1980s, The Walt Disney Company used a pricing strategy in which visitors to its theme parks paid a low admission fee and also paid for rides. This pricing strategy is an example of
A) a two-part tariff. B) perfect price discrimination. C) cost-plus pricing. D) monopoly pricing.
The ________ of the term structure of interest rates states that the interest rate on a long-term bond will equal the average of short-term interest rates that individuals expect to occur over the life of the long-term bond, and investors have no
preference for short-term bonds relative to long-term bonds. A) segmented markets theory B) expectations theory C) liquidity premium theory D) separable markets theory
Suppose a concert by Lady Gaga and a basketball game played by the L.A. Lakers are substitutes, then which of the following is TRUE?
A) If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets will fall. B) If the price of a ticket to a Lakers game decreases, the quantity of Lakers tickets demanded will increase. C) If the price of a ticket to a Lakers game increases, then the demand for Lady Gaga tickets will remain unchanged. D) The price of a ticket to a Lakers game will always equal the price of a ticket to a Lady Gaga concert.
An increase in the real value of stock prices, which is independent of a change in the price level, would best be an example of the:
a. Foreign purchases effect b. Wealth effect c. Interest-rate effect d. Real-balances effect