Often economists measure the loss in consumer surplus by looking at the changing area below the Marshallian demand curve. This approach will provide a more accurate measure of the compensating variation of such a price increase if:
a. the good occupies a small portion of a person's budget
b. the good occupies a large portion of a person's budget.
c. the good has many close substitutes.
d. the good has few substitutes.
a
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If marginal utility becomes negative for the first time, which of the following is true? a. Total utility is growing steeply
b. Total utility begins to decline. c. A rational consumer would never knowingly pay a positive price for these units of the good or service generating negative marginal utility. d. Total utility equals marginal utility. e. Both b. and c. above are correct.
Which of the following describes adverse selection in the insurance market?
a. The buyer has more information than the seller about whether they are high or low risk. b. The buyer behaves in a way they would not behave if they did not have insurance. c. The seller has more information about whether a buyer is high or low risk. d. The buyer and the seller know whether the buyer is high or low risk.
Explain the way an increase in supply with demand remaining constant and a decrease in supply with demand remaining constant are different.
What will be an ideal response?
If the reserve ratio is 0.10, the money multiplier is equal to 5.
Answer the following statement true (T) or false (F)