The demand for a product is likely to be more elastic:
A. the smaller the share of the total budget spent on the product.
B. when more complementary products are available.
C. in the short run than in the long run.
D. when more good substitutes for the product are available.
Answer: D
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Refer to Figure 3-6. The figure above represents the market for canvas tote bags. Assume that the market price is $35. Which of the following statements is true?
A) There is a surplus that will cause the price to decrease; quantity demanded will then increase and quantity supplied will decrease until the price equals $25. B) There is a surplus that will cause the price to increase; quantity demanded will then decrease and quantity supplied will increase until the price equals $25. C) There is a surplus that will cause the price to decrease; quantity supplied will then increase and quantity demanded will decrease until the price equals $25. D) There will be a surplus that will cause the price to decrease; demand will then increase and supply will decrease until the price equals $25.
Moral hazard can contribute to high bank leverage in all of the following ways EXCEPT
A) having high capital requirements. B) bank managers are compensated in part on providing shareholders with high returns on equity. C) high bank leverage provides shareholders with a potential for a higher return on equity. D) federal deposit insurance has reduced the incentive of depositors to monitor the behavior of bank managers.