1) If the cross elasticity of demand between Coke and Pepsi is 2.02, then Coke and Pepsi are
A. inferior goods.
B. complements.
C. normal goods.
D. substitutes.
E. Both answers B and C are correct.
2. Assume that the state of Missouri decided to place a tariff on every product produced outside the state in an effort to increase the state's revenue and increase employment in the state. If Missouri did so
A. the prices of goods imported into Missouri would fall.
B. other states would begin to dump in Missouri.
C. workers with jobs in new firms replacing outminus−ofminus−state imports would earn high income.
D. the? state's total output would definitely increase.
E. the standard of living within Missouri would decrease.
3) Technology reduces the average cost of production, so in the long run
i. perfectly competitive firms produce at a lower average cost.
ii. the market price of the good falls.
iii. firms with older plants either exit the market or adopt the new technology.
A. i only.
B. iii only.
C. i and ii.
D. i and iii.
E. ?i, ii, and iii.