An economist estimates that 0.67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could
a. advertise more to raise the price elasticity of demand
b. encourage more parents to use cloth diapers
c. lower the price of disposable diapers to raise more revenue
d. raise the price of disposable diapers to raise more revenue
e. increase revenue by lowering price elasticity of demand
D
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In the short run, a firm in monopolistic competition produces where
A) MR = MC and economic profit is equal to zero. B) MR = MC. C) the given market price is equal to MC and economic profit is equal to zero. D) the given market price is equal to MC.
Let: (1 ) Pt be the price of one unit of a market basket of goods (i.e., a composite commodity) in year t; (2 ) Pet+1 be the expected price of one unit of a market basket of goods in year t + 1; (3 ) ?et+1 be the expected rate of inflation between period t and t + 1; and (4 ) it be the one-year nominal interest rate. Suppose an individual borrows the equivalent of one unit of a composite
commodity today. Given this information, which of the following expressions represents (i.e., is equal to) the amount of the composite commodity one must repay in one year? A) (1 + it)(Pet+1)/(Pt) B) (1 + ?et+1)/(1 + it) C) {(1 + ?et+1)/(1 + it)} - 1 D) {(1 + it)(Pt)/(Pet+1)} - 1 E) none of the above