The average price of gasoline in your neighborhood is $2.15 per gallon. Your neighbor, Diana tells you that you can "save a lot" by frequenting a gas station 20 miles outside your neighborhood where the price of gasoline is $2.06 per gallon However, she
cautions you that there are usually long lines at that station. Is her suggestion beneficial to you?
A) Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial.
B) No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station.
C) Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods.
D) No, my friend is misled; clearly, the lower-priced gasoline must be of inferior quality and could damage vehicles.
Answer: B
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Demand for pork (a normal good) will shift to the left if consumer income in China decreases.
a. true b. false
Consider a consumer who consumes only 
and 
. The price of 
falls.
a. On a graph
with 
on the horizontal and 
on the vertical axis, illustrate the change in this consumer's budget constraint assuming exogenous income I.
b. Illustrate income and substitution effects for 
assuming that both goods are normal.
c. Can you tell whether the cross-price demand curve for 
is upward or downward sloping?
d. Suppose 
is leisure hours and 
is a composite consumption good. Consider an increase in the wage assuming a fixed endowment of leisure (and no exogenous source of income). How is your graph similar and how is it different from what you graphed in (a) through (c)?
e. Is the leisure-demand curve a cross-price demand curve? Why or why not?
What will be an ideal response?
The figure above shows a labor market. If this labor market is perfectly competitive, employment is
A) 0 hours per week. B) 50 hours per week. C) 100 hours per week. D) 150 hours per week.
The paradox of American farming is
A) food has become cheaper and more abundant as the number of farms has decreased. B) the demand for imported luxury food products has risen as the demand for domestic food products has fallen. C) the demand for food has risen as the number of people who pursue farming as a career has fallen. D) the amount of food produced has increased as the average farm size has fallen.