The substitution effect causes a consumer to buy less of a product when its price rises because the:
A) consumer's real income has decreased.
B) consumer's real income has increased.
C) product is now less expensive compared to other products.
D) product is now more expensive compared to other products.
Ans: D) product is now more expensive compared to other products.
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Eric provides cheese (H) and milk (M) to the market with the following total cost function: C(H, M) = 10 + 0.4H2 + 0.2M2. The prices of cheese and milk in the market are $2 and $5 respectively. Assume that the cheese and milk markets are perfectly competitive. What output of cheese maximizes profits?
A. 10 B. 2 C. 2.5 D. 5
The text maintains that people find the workings of the economic system bewildering, largely because____________
Fill in the blank(s) with the appropriate word(s).
Scarcity can best be defined as a situation in which:
A. there are no buyers willing to purchase what sellers have produced. B. there are not enough goods to satisfy all of the buyers' demand. C. the resources we use to produce goods and services are limited. D. there is more than enough money to satisfy consumers' wants.
Which of the following must occur as a result of ceilings on apartment rents that are set below market clearing rental rates?
A. Property owners respond to the ceilings by increasing maintenance and repairs. B. There is a decrease in the quantity of apartments that prospective tenants wish to rent. C. Property owners respond to the ceilings by constructing new apartment buildings. D. There is a decrease in the quantity of apartments that property owners offer for rent.