Other things being equal, demand is less elastic
A) the more expensive the good is.
B) the smaller the percentage of a total budget that a family spends on a good.
C) the longer is the time period for adjustment.
D) the more substitutes a good has.
Answer: B
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An increase in the supply of capital, which is a complement to labor, will lead to
A) an increase in the quantity of labor demanded. B) a decrease in the demand for labor. C) an increase in the demand for labor. D) a decrease in the quantity of labor demanded.
Information on the price elasticity of demand is particularly important to managerial decision making because:
A) the higher the price elasticity of demand for a product is, the more profitable it will be to produce more of it. B) depending on the elasticity coefficient, decision makers will immediately know if a price change will cause profits to increase or decrease. C) it allows one to predict how total revenue will respond, i.e., increase or decrease, to a change in price. D) as the price elasticity coefficient approaches one, profits will increase.
Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should:
a. expand output. b. contract output. c. maintain output. d. There is insufficient information to answer the question.
A higher interest rate will lead a firm to purchase less capital because the higher interest rate
a. lowers the marginal product of capital goods b. causes technological change to cease c. lowers the present value of capital goods d. causes economies of scale to be exhausted e. causes the capital market become monopolized