Refer to the above figure. Suppose that Cheerios and Apple Jacks are substitutes. Which diagram shows the effect on the demand for Cheerios when the price of Apple Jacks cereal has increased?
A. A
B. B
C. neither graph
D. both graphs
Answer: A
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The above figure gives your budget line between CDs and magazines. Which combination of CDs and magazines are affordable?
A) combination a B) combinations a, b, c, and d C) combination c only D) combinations b, c, and d
What is the slope of the price consumption curve for two goods, x and y, when preferences are measured by the utility function U(x,y) = x0.5y0.5, the price of good y is $10, income equals $100, and the price of good x increases from $5 to $10?
A) slope equals zero B) slope is -(1/2) C) slope is 1/2 D) slope is infinite
As the price of samosas (a triangular pastry in India) was raised from 2 to 3 rupees (Indian currency), their quantity demanded fell from 15,000 to 12,000. Rounding to the nearest tenth, the elasticity of demand of samosas is:
A. 1.8. B. 0.6. C. 4. D. impossible to determine because we don't know the exchange rate of the rupee.
Under a flexible exchange rate system, which of the following will be most likely to cause a depreciation in the exchange rate value of the dollar (relative to the English pound)?
a. An economic boom occurs in England, inducing English consumers to buy more American-made automobiles, trucks, and computer products. b. Real interest rates in the United States fall lower than real interest rates in England. c. Restrictive monetary policy in the United States causes inflation to be lower than in England. d. Attractive investment opportunities in the United States induce English investors to buy stock in U.S. firms.