Dino spends his income on two goods, cigars and peppermints. He considers both goods to be normal goods. If Dino's income decreases and the prices of the two goods remain constant, he will purchase:
A. more cigars and fewer peppermints.
B. more cigars and more peppermints.
C. fewer cigars and more peppermints.
D. fewer cigars and fewer peppermints.
Answer: D
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Refer to Figure 3-2. An increase in the price of the product would be represented by a movement from
A) A to B. B) B to A. C) S1 to S2. D) S2 to S1.
Which of the following is NOT a disadvantage of exchange-rate targeting?
A) It relies on a stable money-inflation relationship. B) The targeting country gives up an independent monetary policy. C) The targeting country is left open for a speculative attack. D) It can weaken the accountability of policymakers.
Hot dog vendors on the beach fail to cooperate with one another on the quantity of hot dogs they should sell to earn monopoly profits. A consequence of their failure is that, relative to the outcome the vendors would like, (i) the quantity of hot dogs supplied is closer to the socially optimal level. (ii) the price of hot dogs is closer to marginal cost. (iii) the hot dog market at the beach is
less competitive. a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. (iii) only
When interest rates fall
a. firms want to borrow more for new plants and equipment and households want to borrow more for homebuilding. b. firms want to borrow more for new plants and equipment and households want to borrow less for homebuilding. c. firms want to borrow less for new plants and equipment and households want to borrow more for homebuilding. d. firms want to borrow less for new plants and equipment and households want to borrow less for homebuilding.