Suppose that the owner of a local ice cream store, knowing that demand for ice cream is higher when the weather is warmer, always charges a price in cents for a scoop of ice cream that is equal to two times the current outdoor temperature, measured in Fahrenheit (so that if it is 90 degrees outside, the ice cream is $1.80 per scoop). This type of behavior is ________.
A. known as meeting demand
B. exactly the type of behavior that Keynes believed most firms exhibit
C. inconsistent with the key assumption upon which the basic Keynesian model is built
D. free from menu costs
Answer: C
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The total revenue curve of a monopolist:
A) is positively sloped when marginal revenue is negative. B) is negatively sloped when marginal revenue is negative. C) is positively sloped when the marginal revenue curve is upward sloping. D) is negatively sloped when the marginal revenue curve is downward sloping.
You are reading a newspaper article that refers to expansions and contractions in the economy. The references are to changes in
a. wage rates b. inflation rates c. movements in exchange rates d. real GDP e. investment expectations
Suppose that the market for labor is initially in equilibrium. Suppose that workers' tastes change so that they choose to retire at age 70 rather than age 67 . Then the equilibrium wage
a. and the equilibrium quantity of labor will rise. b. and the equilibrium quantity of labor will fall. c. will rise, and the equilibrium quantity of labor will fall. d. will fall, and the equilibrium quantity of labor will rise.
Some people advocate price ceilings in certain markets because they seek to
A. expand the total of consumer and producer surplus which the market generates. B. enhance both efficiency and distribution goals with the price ceiling. C. redistribute welfare from the producer to the consumer even if overall welfare is sacrificed. D. redistribute welfare from the consumer to the producer even if welfare is sacrificed.