EBK MACROECONOMICS
EBK MACROECONOMICS
10th Edition
ISBN: 9781259662447
Author: Colander
Publisher: YUZU
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Chapter 4, Problem 13QE
To determine

The expected impact of increased security measures imposed by the government on airline fares and volume of travel.

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Airports typically charge a higher price for parking during holidays than they do during other times of the year. Why?
Show transcribed image text Honda Motor Company is considering offering a $2,000 rebate on its minivan, lowering the vehicle's price from $30,100 to $28,100. The marketing group estimates that this rebate will increase sales over the next year from 42,000 to 54,400 vehicles. Suppose Honda's profit margin with the rebate is $5,260 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ ____ million. (Round to one decimal place.) The benefit of the rebate will be $ _____ million. (Round to one decimal place.) Is it a good idea? does or does not Offering the rebate ____ look attractive.
Consider the public policy initiatives aimed at curbing smoking in Australia. a) Studies indicate that the price elasticity of demand for cigarettes is about -0.20. If a packet of cigarettes currently costs $25 and the Australian Government wants to reduce smoking by 15%, by how much should it increase the price? b) If the Australian Government permanently increases the price of cigarettes, will the policy have a larger effect on smoking 1 year from now or 5 years from now? c) Studies also find that teenagers have a higher price elasticity than do adults. Why might this be the case?
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