question
The market for milk is initially in equilibrium. Milk producers now engage in a costly advertising
program to encourage milk drinking. Assume that the advertising campaign succeeds in shifting consumer tastes toward drinking milk. Standard demand and supply analysis tells us:
program to encourage milk drinking. Assume that the advertising campaign succeeds in shifting consumer tastes toward drinking milk. Standard demand and supply analysis tells us:
answer
the equilibrium price and quantity of milk will rise.
question
Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my investment." His economist friend points out that in effect, he did lose money because he could have received a 3% return on the $1,000 if he had bought a bank CD instead of the coins. The economist's analysis incorporates the idea of:
answer
opportunity costs
question
After you graduate from college, you open a business selling computers. There are many other businesses in your city that sell similar computers. Based on this information, the price elasticity of demand for the computers that your business sells will be:
answer
highly elastic.
question
One of the reasons community colleges receive government subsidies is that it is believed that education creates _______, and therefore without subsidies the quantity produced would be _______ the socially optimal quantity.
answer
positive externalities; less than
question
Sarah owns a small flower shop and the industry is perfectly competitive. She is considering whether or not to hire an additional worker. The wage rate for the worker is $500 per week; the marginal product of the additional worker would be 100 units per week; and the price of the units produced is $10 per unit. What should Sarah do?
answer
Hire the additional worker.
question
Refer to the above data. Equilibrium price will be:
answer
$2.
question
Firms in any kind of market structure share one common feature:
answer
They produce where MR=MC
question
Which of the following is one of the leading causes of poverty in the United States?
answer
all of the above
question
Refer to the above diagram. The equilibrium price and quantity in this market will be:
answer
$1.00 and 200.
question
Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will:
answer
decrease, quantity demanded will increase, and quantity supplied will decrease.
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