The quantity theory of money and prices assumes
A. velocity is increasing at a constant rate.
B. the price level is constant.
C. the price level is increasing at a constant rate.
D. velocity is constant.
Answer: D
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Instead of studying for an additional two hours for the economics final, Leann decides to watch a movie. Leann is making
A) a rational decision if her marginal cost from the movie is greater than her marginal benefit. B) an irrational decision because studying is more important than watching a movie. C) a decision that is not on the margin because she will see the entire movie. D) a decision that does not involve an opportunity cost. E) a rational decision if her marginal benefit from the movie is greater than her marginal cost.
A local Krispy Kreme doughnut shop reduced the price of its doughnuts from $4 per dozen to $3.50 per dozen, and as a result, the daily sales increased from 300 to 400 dozen. This indicates that the price elasticity of demand for the doughnuts was:
a. elastic. b. inelastic. c. of unitary elasticity. d. indeterminate; more information is needed to determine the price elasticity of demand.