The higher the interest rate, the higher the price of a bond.
If the total benefits received from drug enforcement exceed its total costs, then the
government should expand its drug enforcement activity.
If a model is based on unrealistic assumptions, then it cannot be robust.
If a project costs $2000 up front and generates revenues of $500 per year for ten years,
then any profit maximizing company will choose to undertake the project.
Two identical firms have access to a spring. Their marginal cost of bottling water from
the spring is a constant 10¢ per bottle. The market demand for bottled spring water is P
= 250 – 20Q, where P is the price (in cents per bottle) and Q is the quantity demanded
(in hundreds of bottles).
By definition, someone who has a comparative advantage in producing soft drinks must
also have an absolute advantage in producing soft drinks.
Relative prices cannot fall when absolute prices are rising.
Consider the following:
A risk-averse individual always prefers the basket with the highest standard deviation
when choosing among baskets with the same expected value.
If labor is a regressive factor, then a firm’s long-run demand for labor may or may not
be downward sloping.
Consider the following:
Railway engines create sparks, which sometimes set fire to crops planted near the
tracks. A large number of farmers are affected, and transactions costs prevent the
farmers and the railroad from negotiating bribes or side payments. The price of railway
service is $250 per train, and each train causes $50 of crop damage. The accompanying
diagram shows the relevant market for railway service.
When labor is the only variable input in the short run, average variable cost equals the
wage rate times the average product of labor.
The gains from international trade are greatest when a country’s autarkic relative prices
are similar to the world relative prices.
No one benefits when interest rates rise, because everyone’s current consumption will
be lowered.
Economic analysis suggests that resale price maintenance is primarily used by
manufacturers to keep prices artificially high.
If either player is receiving his maximum payoff, then that outcome is a Nash
equilibrium.