Assume a consumption function of the following form: C = 500 + .9Y. If income rises by $100, consumption will increase by
A) $90.
B) $550.
C) $590.
D) $600.
B
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Exhibit 8-2 Consumption function
As shown in Exhibit 8-2, the 450 line represents:
A. autonomous consumption. B. real consumption spending. C. real disposable income. D. all points where real consumption equals real disposable income.
Suppose you have spent your entire budget and for all the goods you purchase the marginal utilities per dollar spent are identical. Which of the following is true?
a. You are being irrational. b. You can increase your utility by reallocating your income. c. You will reduce your utility if you allocate income in any other way. d. You are minimizing your marginal utility. e. You can avoid diminishing marginal utility.
If a monopolist produces to a point at which marginal revenue is more than marginal cost then
A) the firm should increase output. B) the firm should reduce output. C) the firm is maximizing profits. D) we do not know if the firm should increase or reduce without more information.
Production of a good produces pollution that is very damaging with each additional unit. A monopoly facing a very elastic demand curve will most likely produce
A) less than the social optimum of the good. B) more than the social optimum of the good. C) the social optimum of the good. D) no externality.