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For each of the following claims, please state if it is true, false or uncertain. Provide a brief written justification for your answer (a sentence or two will suffice).
(1) When the price of tomato sauce increases by 5%, the quantity demanded drops by 10%. Then, demand of for tomato sauce is elastic. (2) Notebooks have an inelastic demand. When the price of notebooks drops by 1%, the quantity demanded demand increases by 2%.
(3) The quantity of coffee demanded drops by 5% after that the price increase by 5%. It means that the demand for coffee is unit elastic. (4) Demand a farmer's wheat is inelastic. When the price of wheat increases by 20%, the revenue of the farmer increase by 5%.
(5) If my income increases by 10%, then quantity of public transportation demanded drops by 5%. I can say that income elasticity of my demand for public transportation is negative and that public transportation is a normal good.
6) If the demand for cheese in France is perfectly inelastic, an increase in the price of cheese will reduce the quantity demanded.
Suppose there is an increase in supply (rightward shift in supply). Consider two graphs. In Graph [X], demand is relatively inelastic. In Graph [Y], demand is relatively elastic. Which of the following is true?Suppose Bill gets a pay raise of 12%, ..
Let L denote the level of employment (measured in thousands of worker hours), and W the hourly wage. Suppose that the supply of labor is given by LS=10+2W and that the demand for labor is LD=40-W. Calculate the equilibrium wage and level of employm..
A monopoly sells music CDs. It has a constant marginal and average total cost of $20. It faces two groups of potential customers: honest and dishonest people. The dishonest and honest consumers' demand functions are the same,Qh = Qd = 120 - P.
Customer Group B is willing to pay $29,000 for the SUV and $1,000 for the towing package. Assuming the manufacturer cannot price discriminate but can bundle the products or sell them separate, which of the options below maximizes its revenues
Demand for flower bouquets in a suburban town is described by: QD = 50 - 5 P + 2 Y, where Q is quantity, P is price per unit, and Y is an index of consumer income. Similarly, supply is described by QS = 10 P - 5.
A biomass plantation operator can invest $1,000 today to plant a new crop of trees, which, is estimated, can be sold at a net gain(sales-harvesting costs) of $10,000 in 40 years. Determine whether this is profitable if a rate of return of 7%/yr is..
If the newer equipment is purchased, it will have end-of-year O&M costs of $8,000 and a salvage value of $20,000 at that time. If the old equipment is retained, it will have to be supplemented in years 3, 4, and 5 by leasing a hi-def add-on unit c..
Consider the simple linear regression model without an intercept, y = ß1x + u, with the assumption E(u|x)=0. Also assume that E(x)=0 Show that E(y)=0 and using this as well as E(x)=0 show that the covariance between x and y is given by E(xy) and t..
The national average for the verbal portion of the College Board's Scholastic Aptitude Test (SAT) is 507. The College Board periodically rescales the test scores such that the standard deviation is approximately 100. Compare and contrast the Empiri..
This utility function implies that Shelly's marginal utility of leisure is C - 200 and her marginal utility of consumption is L - 80. There are 168 hours in the week available to split between work and leisure. Shelly earns $5 per hour after taxes..
Suppose that the Fed's inflation target is 2%, potential output growth is 3.5%, and velocity is a function of how much the interest rate differs from 5%: %^V= 0.5 X (i-5). Suppose that a model of the economy suggests that the real interest rate
Suppose the inverse demand for a product is Q = ?P 1/2 + 10. Write the expression for the demand curve, i.e., P = f(Q). What kind of expression is this?
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