Question

1. Research by Warburton, and more recently Miron and Zweibel on alcohol consumption during and after prohibition indicates that

: a. the demand for alcohol is fairly price inelastic.

b. the demand for alcohol is fairly income inelastic.

c. the demand for alcohol is fairly price elastic.

d. the demand for alcohol has a price elasticity of zero.

2. The term “path dependence” refers to

a. inefficient outcomes that result from early technology choices that are not optimal in the long run.

b. the tendency for competitive markets to become monopolistic in the long run.

c. inefficient outcomes that result from negative externalities.

d. the natural growth of monopoly when economies of scale exist in a market.

3. According to economic theory, the real wage should

a. be greater than the price of the product produced.

b. equal the marginal physical product of labor.

c. be less than the marginal product of capital.

d. decline as productivity rises.

4. The introduction of computer-based technologies in the telephone industry caused

a. an increase in the supply of telephone services.

b. an increase in the demand for telephone services.

c. an increase in the price of telephone services.

d. a decrease in the number of calls handled daily by telephone companies.

Answer 1

Answer-1. Correct option is 'a'

Research by Warburton, and more recently Miron and Zweibel on alcohol consumption during and after prohibition indicates that the demand for alcohol is fairly price inelastic. The demand for alcoholic beverages in total is expected to be highly price inelastic because there are no close substitutes to alcoholic beverages. Raising alcohol price reduces alcohol consumption, but typically the fall in consumption is proportionately smaller than the increase in price.

Answer-2. Correct option is 'a'

The term “path dependence” refers to inefficient outcomes that result from early technology choices that are not optimal in the long run. Path dependence theory was originally developed by economists to explain technology adoption processes and industry evolution.

Answer-3. Correct option is 'b'

According to economic theory, the real wage should equal the marginal physical product of labor. Every worker of same skill and efficiency in a given category will receive a wage equal to the value of the marginal product of that type of labor.

Answer-4. Correct option is 'b'

The introduction of computer-based technologies in the telephone industry caused an increase in the demand for telephone services.