"The income elasticity of a good is positive if a consumer increases the total spending on that good as a result of an increase in its market price." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. If a consumer increases the total spending on a good when the price of that good increases, then the good will have a price inelastic demand. The income elasticity of a good is positive if its demand increases as result of an increase in income.
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A firm should keep producing output as long as the marginal profit is greater than zero, no matter how small it is
a. True b. False Indicate whether the statement is true or false
Which of the following statements is NOT true for a perfectly competitive firm?
A. The market demand and supply curves determine the market price. B. The firm's demand curve is perfectly elastic. C. The firm can influence its demand curve by advertising its product. D. A firm's demand curve is horizontal.
An additive social welfare function would
A. add the incomes of the lowest ten percent of income earners. B. subtract out the utility functions of all people who are unemployed. C. sum all individual utilities. D. maximize the utility of the person with the minimum utility.
A progressive tax is one in which the fraction of income paid in taxes rises as a person's income increases
a. True b. False Indicate whether the statement is true or false