If a decrease in the price of good A causes an increase in the demand for good B, then A and B must be complements
a. True
b. False
A
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
Suppose the seller of a used car provides unverifiable information about its quality to a prospective buyer. Unverifiability will reduce the cost of formulating a contract
Indicate whether the statement is true or false
If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be ________ because these two goods are ________.
A. equal to 1; inelastic B. negative; substitutes C. negative; complements D. zero; inferior
Suppose that the market for engagement rings is in equilibrium. Then political unrest in South Africa shuts down the diamond mines there. South Africa is the world's primary supplier of diamonds. What will happen?
A. The supply of engagement rings will increase. B. The equilibrium quantity of engagement rings will decrease. C. The demand for engagement rings will decrease. D. The equilibrium price of engagement rings will decrease.