Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic. She argues "I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor
If I wanted to buy a mystery novel I would have many authors to choose from. Therefore, the demand for mystery novels is more elastic than the demand for my textbook." Is Jill correct?
A) She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit cards. Most people pay for novels and other books with debit cards.
B) She is correct.
C) She is confused. She should have concluded that the textbook has a more elastic demand than a novel.
D) The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel.
B
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The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. After the demand increases, a typical firm will
A) make zero economic profit. B) make an economic profit. C) incur an economic loss. D) exit the market.
Which of the following is a commonly-cited benefit of advertising?
a. Advertising can be a signal of the quality of a product. b. Advertising impedes competition. c. Advertising reduces the deadweight loss associated with monopolistic competition. d. Advertising encourages free entry, which increases profits.