If the absolute price elasticity of demand is 2.0, a 10 percent decrease in price will increase quantity demanded by

Assume that one firm in a perfectly competitive market adopts a technological innovation that enables it to produce at a lower cost per unit than competing firms in the short run. Which of the following statements is correct?

a. The innovating firm will earn above-normal profit in the long run. b. All the competing firms will be forced to exit the market in the long run. c. This is an example of a decreasing cost industry. d. Competing firms will need to adopt the new technology in the long run in order to survive. e. Only new firms entering the industry with new-technology plants will be able to compete with the innovating firm.

Based on the CPI, how do we measure annual inflation?

a. We compute the total price of a fixed set ("market basket") of goods and services in a base year, such as 2003, and in a future year, such as 2004. b. We get CPI for 2004 by multiplying the 2004 total cost with the 2003 total cost, and divide by 100 . A similar calculation will yield the CPI value for 2003. c. We get CPI for 2004 by adding the CPI value for 2003 to the CPI value for 2004, and multiply by 100. d. We compute the total cost of a fixed set ("market basket") of goods and services in a base year, such as 2003, and in a future year, such as 2004.