When the price of a normal good decreases, people increase their consumption of the good. The reason is
A. the income effect only.
B. the law of diminishing marginal utility.
C. the substitution and income effects.
D. the substitution effect only.
Answer: C
You might also like to view...
Average total cost is
A) total explicit costs divided by the quantity of output produced. B) total cost divided by the quantity of output produced. C) the change in fixed plus variable cost divided by the quantity of output produced. D) variable cost divided by the quantity of output produced.
Suppose twenty neighbors share a park. One of the neighbors, Al, leaves trash in the park. This bothers the other neighbors. According to Coase's Theorem, assigning the property rights to the park to Al
A) will achieve the socially optimal quantity of trash. B) will result in zero trash being dumped in the park. C) might still not achieve the social optimum since coordinating the other nineteen neighbors can be costly. D) is unfair.
Refer to Figure 4.1. The substitution effect of the price change in food on the quantity of food purchased is:
A) the change from F3 to F1. B) the change from F3 to F2. C) the change from F2 to F1. D) the change from F1 to F2. E) none of the above
Professor Gordon posits that the best years of U.S. growth are behind us because of four "headwinds," which are:
a. lackluster growth and poverty b. demographids and education c. debt and inequality d. a and b only e. b and c only