MY LAB ECONOMICS W/ E TEXT MACROECONOMI
MY LAB ECONOMICS W/ E TEXT MACROECONOMI
6th Edition
ISBN: 9780134125664
Author: Pearson
Publisher: PEARSON
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Chapter 2, Problem 2.1.12PA
To determine

Trade-off in the increasing price of drugs.

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In an article about the financial problems of USA Today, Newsweek reported that the paper was losing about $20 million a year. A Wall Street analyst said that the paper should raise its price from 50 cents to 75 cents, which he estimated would bring in an additional $65 million a year. The paper’s publisher rejected the idea, saying that circulation could drop sharply after a price increase, citing The Wall Street Journal’s experience after it increased its price to 75 cents. 1- What implicit assumptions are the publisher and the analyst making about price elasticity?
Recently, television commercials promoting toothpaste featured a well-known chef expressing satisfaction with the latest in toothpaste flavors, including citrus, herbal, mint, and cinnamon. U.S. consumers fully understand the health benefits of brushing their teeth, so makers of the various brands sold in the toothpaste market seek to emphasize how good their toothpastes taste. Manufacturers have also differentiated their toothpastes by promoting them as beauty products. Using such names as “Whitening Expressions” and “Rejuvenating Effects,” toothpaste companies battle in media ads to convince toothpaste consumers that their great-tasting brands of toothpaste will also produce the brightest smiles. If a number of consumers become convinced that a particular brand of toothpaste really will “rejuvenate” their teeth, what will happen to the price elasticity of demand for that particular toothpaste?
In his State of the Union address in 2003, President Bush supported the idea of changing from the use of internal combustion engines to fuel cells based on hydrogen as a way of reducing air pollution and the emission of greenhouse gases. Fuel cells are nonpolluting because they only emit water vapor. President Bush proposed having the government subsidize research and development of hydrogen fuel and fuel cell technology. The president did not propose raising taxes on gasoline as a way of encouraging the use of fuel cells and reducing greenhouse gases. Currently, hydrogen is more expensive than gasoline. Would an increase in the tax on gasoline encourage the development of hydrogen-based fuel cell technology for automobiles?
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