If both supply and demand simultaneously decrease,
A. the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate.
B. the market clearing price definitely rises, and the equilibrium quantity definitely falls.
C. the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate.
D. the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls.
Answer: D
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In a monopolistically competitive market, a successful new restaurant
A) can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants. B) must obtain a trademark to ensure that it will break even in the long run. C) will face high entry barriers because of health and safety regulations to which all restaurants are subject. D) will earn zero economic profit in the long run because of free entry, but competition will lead restaurants to offer different versions of the same product.
The absolute price elasticity of demand for good X is 1.2 when price is measured in dollars. If price were measured in cents, the price elasticity elasticity of demand would equal
A) 1200. B) 12. C) 1.2. D) 0.012.