We observed that the price of a good rises and the quantity purchased also rises. Everything else being equal, it is consistent that
A. the price of a substitute good fell.
B. the price of a complement rose.
C. income rose.
D. costs of inputs increased.
Answer: C
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Adverse selection in the market for health insurance arises because
A) buyers of insurance know more than insurance companies about the likelihood of an illness for which buyers want insurance. B) the federal government intervenes in insurance markets by controlling prices and reimbursement policies. C) many insurance companies care more about profits than they do about providing services for their customers in the event of illness. D) insurance companies are not allowed to charge premiums that are high enough to insure against "worst-case" illness.
Consider the two statements: I. X is an inferior good. II. X exhibits Giffen's Paradox. Which of the following is true?
a. I implies II, but II does not necessarily imply I. b. II implies I, but I does not necessarily imply II. c. I and II are statements of the same phenomenon.
“Those most able should pay the highest taxes” reflects the
A. ability-to-pay principle. B. concept of horizontal equity. C. idea of fiscal federalism. D. benefits principle.
GDP understates the value of output produced by an economy because it:
A. includes transactions that do not take place in organized markets, such as home-cooked meals. B. excludes value added from the underground economy, such as tips taken "under the table." C. includes environmental degradation caused by increased output production. D. excludes the value of the wages and benefits of government employees.