Which of the following must be true about homothetic tastes:
A. Utility functions that represent those tastes are homogeneous of degree 1.
B. There exists a utility function that represents those tastes and is homogeneous of degree 1.
C. There exists a utility function that represents those tastes such that the expenditure function is homogeneous of degree 1.
D. The indirect utility function is homogeneous of degree zero.
E. Both (a) and (c).
F. Both (b) and (c).
G. Both (b) and (d)
H. None of the above.
Answer: G
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Which of the following examples best illustrates the concept of derived demand?
A) An increase in the price of beef results in an increase in the demand for fish. B) The higher the demand for automobiles, the greater the demand for steel. C) The demand for Pepsi varies directly with the price of Coke. D) The demand for a good varies inversely with its price.
If an economy consumes 75 percent of any increase in disposable income, then an increase in autonomous investment of $1 billion could result in an increase in total spending of as much as
A) $1.0 billion.. B) $4.0 billion. C) $5.0 billion. D) $1.8 billion. E) $6.0 billion.
Marginal analysis suggests that you will engage in more of an activity if the:
A. total benefit of the activity is less than the total cost. B. additional benefit from the activity exceeds the additional cost. C. additional cost of the activity exceeds the additional benefit. D. total benefit from the activity exceeds the total cost.
In ________ the United States Congress passed the Sherman Antitrust Act.
A. 1787 B. 1890 C. 1914 D. 1950