If all individuals have identical utility functions and the marginal utility of income decreases as income increases, transferring income ________ will ________ total utility.
A. from the rich to the poor; increase
B. from the poor to the rich; not change
C. from the rich to the poor; not change
D. from the rich to the poor; decrease
Answer: A
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In the wake of Henry Ford's payment of efficiency wages in 1914 ________
A) absenteeism and productivity fell B) absenteeism and productivity rose C) absenteeism rose and productivity fell D) absenteeism fell and productivity rose
All of the following are examples of conditional sales except which one?
A) territorial confinement B) tying arrangements C) exclusive dealing D) price discrimination
Suppose a given basket of goods and services costs 15 dollars in the United States and 14,250 won in Korea. If the exchange rate is 900 won per dollar, purchasing power parity implies that the:
A. exchange rate has attained its long run equilibrium value. B. won must appreciate to restore purchasing power parity. C. dollar must depreciate to restore purchasing power parity. D. dollar must appreciate to restore purchasing power parity.
You explain to your roommate Surya, who makes beaded headbands, about an economic theory which asserts that consumers will purchase more of a product at lower prices than they will at higher prices. She contends that the theory is incorrect because over
the past two years she has lowered the price of her headbands and yet has seen a decrease in sales. How would you respond to Surya? A) Surya is right; she has evidence to back her claim. The theory must be erroneous. B) Surya is making the mistake of assuming that correlation implies causation. C) I will explain to her that she is making the error of reverse causality: it is the decrease in demand that has caused her to lower her prices. D) I will explain to her that there are some omitted variables that have contributed to a decrease in her sales such as changes in income.