In the diagram above, Cheri's budget line shifts outward from AB to CD. Which statement below is consistent with this shift?
A. Her income is reduced; no change in either price.
B. Both the price of good 1 and Cheri's income increase; there is no change in the price of good
C. Both prices double; her income doubles.
D. Both prices are reduced by 50 percent; her income is reduced by less than 50 percent.
Answer: D
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Technological change allows perfectly competitive firms to ________ and leads to ________
A) lower their costs; lower prices for consumers B) raise their prices; higher prices for consumers C) lower their costs; higher prices so the firms can earn economic profits in the long run D) raise their costs; higher prices and maximum profits in the long run E) lower their costs; deadweight loss
Which of the following is true concerning the income effect of a decrease in price?
A) It will lead to an increase in consumption only for a normal good. B) It always will lead to an increase in consumption. C) It will lead to an increase in consumption only for an inferior good. D) It will lead to an increase in consumption only for a Giffen good.
Which of the following statements is false?
A) Consumers receive more consumers' surplus when tariffs do not exist. B) Producers receive more producers' surplus when tariffs do exist. C) A tariff results in a net loss to society. D) With a tariff, the gains to the winners are less than the losses to the losers. E) none of the above
Non-smokers being exposed to smoke from smoking by others (i.e., second-hand smoke) is an example of
A. a situation where social marginal benefit exceeds social marginal cost. B. moral hazard. C. transboundary pollution. D. a negative externality.