Suppose that as the price of apples rises, people switch from eating apples to eating oranges. This is known as:
A. the income effect of a price change.
B. a decrease in the demand for apples.
C. the substitution effect of a price change.
D. the normal effect of a price change.
Answer: C
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If you are indifferent between investing $1000 for one year in a U.S. Treasury security that has an interest rate of 5% or in a Canadian government security that has an interest rate of 8%, you must be expecting
A) the inflation rate in the United States will be higher than the inflation rate in Canada during the year. B) the U.S. dollar to depreciate against the Canadian dollar by 3% during the year. C) the U.S. dollar to appreciate against the Canadian dollar by 3% during the year. D) productivity growth in Canada to be greater than productivity growth in the United States during the year.
Externalities between two firms can be "internalized" if: I. The two firms merge. II. Bargaining costs are zero. III. The externalities affect each firm equally. IV. Marginal costs for both firms are constant. Which statement(s) correctly complete(s) the sentence?
a. Only II. b. All except III. c. I and II, but not III and IV. d. I and IV, but not II and III
Under a regulatory fair price,
a. price is driven to zero b. revenues would just be sufficient to cover costs c. price is set equal to marginal revenue d. profit is set at the monopoly level e. revenues would be set equal to marginal cost
National health care programs are not as effective as they could be because:
A. patients are not receptive to utilization of modern medicine in most nations. B. many doctors in clinics do not have sufficient knowledge to properly diagnose patients. C. traditional Western medicine is largely untrusted in most parts of the developing world. D. health care providers tend to have a high absentee rate.