The law of one price states that if the costs of transportation are ________, the price of the same good in different countries should be ________.
A. small; roughly the same
B. large; roughly the same
C. large; exactly the same
D. small; very different
Answer: A
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The ratio of the change in consumption to the change in disposable income is the
A) average propensity to save. B) marginal propensity to consume. C) average propensity to consume. D) marginal propensity to save.
As the relative price of a good falls, the substitution effect implies that people buy
A) less of that good and more of its substitutes. B) more of that good and less of its substitutes. C) less of that good and less of its substitutes. D) more of that good and more of its substitutes.
Policy should create an environment in which the economy can expand its productive capacity rapidly, because that is the ultimate source of higher living standards. This task is the realm of
a. growth policy. b. stabilization policy. c. labor policy. d. inflation policy.
Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increased on beer because college students drink too much." We can conclude that:
A. Ben's statement is normative, but Holly's is positive. B. Holly's statement is normative, but Ben's is positive. C. Both statements are normative. D. Both statements are positive.