When demand is inelastic and price decreases: A) the effect of the decrease in price on total revenue dominates the effect of the increase in quantity demanded on total revenue; overall total revenue declines. B) the effect of the increase in quantity demanded on total revenue dominates the effect of the decrease in price on […]
Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively: A) large decrease in quantity demanded. B) large decrease in demand. C) small decrease in quantity demanded. D) small decrease in demand. ANSWER A
The major categories of expenditures in the economy are: A) consumption, gross investment, and government purchases. B) consumption, net investment, and net exports. C) consumption, fixed investment, government purchases, and net imports. D) consumption, gross investment, government purchases, and net exports. ANSWER D
The fact that the firms in an oligopoly are mutually interdependent means that each firm: A) must consider the reactions of its competitors when it sets the price for its output. B) produces a product that is similar, but not identical, to the products of its competitors. C) produces a product that is identical to […]
Which of the following is not included in gross private domestic investment spending? A) Household spending on residential construction. B) Spending on business inventories. C) Household spending on durable goods. D) Business spending on plant and equipment. ANSWER C
Which of the following would not be classified as an oligopolistic industry? A) Defense contractors. B) The recorded music industry. C) The tobacco industry. D) The women’s clothing industry. ANSWER D
Assume that with existing tax and spending laws, government spending exceeds government tax revenues. To cover the resulting shortfall, the government must: A) increase consumers’ incomes. B) print more money. C) Borrow money in the financial markets. D) lower interest rates. ANSWER C
The assumed goal of the firms that operate in each of the four market structures discussed in the text is to maximize: A) sales. B) revenue. C) profits. D) price. ANSWER C
The airline industry is best classified as: A) an oligopoly. B) a monopoly. C) perfectly competitive. D) monopolistically competitive ANSWER A
If the percentage change in quantity demanded is less than the percentage change in price, we would say that over this range, demand is: A) elastic. B) unit elastic. C) inelastic. D) perfectly elastic. ANSWER C
