When the price of a product falls, the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.
a. true
b. false
Ans: b. false
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We use interest rates to measure the opportunity cost of holding money
Indicate whether the statement is true or false
An important characteristic of the modern payments system has been the rapidly increasing use of
A) checks and decreasing use of currency. B) electronic fund transfers. C) commodity monies. D) fiat money.
Which of the following statements is NOT compatible with explanations for why peak-load pricing is more profitable than charging a single price?
A) Consumer willingness to pay for the product varies a lot across different time periods. B) Marginal cost of production is much higher under peak demand. C) Marginal revenue changes a lot across different time periods. D) Marginal revenue must be the same across different time periods.
(Appendix) If relative income standing and job safety both matter, then
A. workers will always be able to find the best suitable job. B. a free market environment for choosing both objectives can bring optimality. C. if no legislation occurs, workers will be unsafe and less equal in income standing. D. a prisoner dilemma problem may result where optimality requires collusion or a law requiring cooperation.