As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called:
A. the income effect of a price change.
B. a decrease in reservation price.
C. a decrease in demand.
D. the substitution effect of a price change.
Answer: D
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Explain why a monopoly that knows the demand curve of identical consumers can set a two-part tariff with the lump sum tariff equal to the total amount of potential consumer surplus
What will be an ideal response?
Samuelson and Solow believed that the Phillips curve offered policymakers a menu of possible economic outcomes
a. True b. False Indicate whether the statement is true or false
Who gains surplus when consumers in a market are given a Pigouvian subsidy for a positive externality?
A. Others affected by the externality B. Both consumers and producers gain surplus. C. Producers D. Consumers
A binding price floor is designed to:
a. increase efficiency. b. raise the price above the equilibrium price. c. keep the price below the equilibrium price. d. generate a shortage