Use the following two statements in answering this question: I. For all Giffen goods the substitution effect is larger than the income effect. II. For all inferior goods the substitution effect is larger than the income effect
A) I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) I and II are false.
D
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Which of the following is NOT an example of moral hazard in business?
A) A bank buys risky mortgage securities because they believe the government will provide a bail-out if the investment performs badly. B) A firm uses venture capital to speculate in the commodity futures market. C) A firm does not hire adequate security protection for its warehouse after it pays for insurance on the property. D) Firms with the large debt problems are more likely to apply for bank loans than financially stable firms.
Firms have incentive to enter a monopolistically competitive market if:
A. positive profits are being earned and the price is below MC. B. zero profits are being made and they can duplicate the product exactly. C. positive profits are being earned and they can create a similar product. D. zero profits are being made and they can create a similar product.
A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has average revenue of $9 and average total cost of $7 . It follows that the firm's
a. average total cost curve intersects the marginal cost curve at an output level of less than 200 units. b. average variable cost curve intersects the marginal cost curve at an output level of less than 200 units. c. profit is $400. d. All of the above are correct.
Suppose Bianca buys a used a textbook from Sebastian for $55. If Bianca's surplus from this transaction was $10, we can infer that:
A. Bianca's reservation price was $60, and Sebastian's reservation price was $50. B. Sebastian's reservation price was $45. C. Bianca's reservation price was $65. D. Bianca's reservation price was $45.