Answer the following statement true (T) or false (F)
1) The limited money income of consumers results in a so-called budget constraint.
2) A rational consumer will cease purchasing a product at that quantity where marginal utility
begins to diminish.
3) When a consumer is maximizing total utility, he or she cannot increase total utility by
reallocating expenditures among different products.
4) When the price of a product falls, the income effect induces the consumer to purchase more of
it while the substitution effect prompts her to buy less.
1) T
2) F
3) T
4) F
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The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
Use the following table to answer the question below.Alexandra's Production Possibilities ScheduleNatalia's Production Possibilities ScheduleNumber of Scarfs Knitted per dayNumber of Sweaters Knitted per dayNumber of Scarfs Knitted per hourNumber of Sweaters Knitted per hour040433236242916112080If they are given 3 days to work how many sweaters could Natalia make if she spent the whole time knitting scarves?
A. 4 B. 16 C. 12 D. 24
Explain the "tragedy of commons."
What will be an ideal response?
When externalities are present in a market, the well-being of market participants
a. and market bystanders are both directly affected. b. and market bystanders are both indirectly affected. c. is directly affected, and market bystanders are indirectly affected. d. is indirectly affected, and market bystanders are directly affected.