Inferior goods have an income elasticity of demand that is:

Inferior goods have an income elasticity of demand that is:
 a. positive.
  b. negative.
  c. 0.
  d. greater than 1 in absolute value.
  e. equal to 1 in absolute value.

QUESTION 2

If a firm's marginal revenue from its 100th unit of output is 50 and the marginal cost from its 100th unit of output is 45, then in the short run this firm should:
 a. increase its plant size.
  b. change its technology.
  c. produce more than 99 units of output.
  d. produce less than 100 units of output.
  e. shut down.

QUESTION 3

The cross price elasticities among substitute goods will be extremely high when:
 a. b and d.
  b. they are very similar to each other.
  c. people are consuming them frequently.
  d. people consume them in equal quantities.
  e. they are imperfect substitutes.

QUESTION 4

The most profitable output level can be found by looking at which two curves?
 a. P and MR.
  b. MR and MC.
  c. MC and TC.
  d. P and AVC.
  e. AVC and ATC.

QUESTION 5

If goods X and Y are such that the cross price elasticity between them is negative, and if the income elasticity of X is negative, then these goods are:
 a. inferior complements.
  b. luxury complements.
  c. income elastic substitutes.
  d. normal substitutes.
  e. income elastic complements.

QUESTION 6

If a potato farmer expands output, he finds that the increase in total revenue is less than the increase in total costs. This means that:
 a. profit is being maximized.
  b. he should not have expanded output.
  c. he should produce even more output.
  d. the firm is wasting resources.
  e. the farmer should go out of business.