Which of the following is correct? When the price of normal good Z falls:
A) both income and substitution effects cause the consumer to buy more.
B) both income and substitution effects cause the consumer to buy less.
C) the income effect causes the consumer to buy less, but the substitution effect causes her to buy more.
D) the income effect causes the consumer to buy more, but the substitution effect causes her to buy less.
Ans: A) both income and substitution effects cause the consumer to buy more.
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Among the factors that might lead to a divergence from the path of prices for a depletable resource predicted by the economic models are: (i) unexpected discoveries of new reserves; (ii) new technologies that reduce extraction costs.
A. i and ii B. i but not ii C. ii but not i D. neither i nor ii
Now that Social Security payments are indexed the:
A. nominal value is adjusted to maintain a constant real value. B. real value is adjusted to maintain a constant nominal value. C. payments are adjusted so retirees can buy more with their payments over time. D. payments are not adjusted enough, so retirees can buy less with their payments over time.
Suppose that two poker players believe that they are superior players to the rest of the people at their table. Further suppose that the two players make an agreement to concede hands to each other in order to drive the other players from the game first. Economists would model such behavior as
a. monopolistic competition. b. game theory. c. predatory pricing. d. a dominant strategy.
Refer to the two diagrams for individual firms. Figure 1 pertains to:
A. an imperfectly competitive firm.
B. a purely competitive firm.
C. an oligopolist.
D. a pure monopolist.