Sam has $200 a month to spend on either tanning sessions or rounds of golf. Tanning sessions are $20 each, and a round of golf is $40. Sam currently consumes six tanning sessions and two rounds of golf. Both tanning and golf are normal goods. If the price of a round of golf drops to $20, the income and substitution effects will cause Sam's consumption of tanning sessions:
A. to increase, since both effects predict an increase.
B. to decrease, since both effects predict a decrease.
C. to change, but the direction is dependent upon which effect is stronger.
D. It is impossible to say what will happen without more information.
C. to change, but the direction is dependent upon which effect is stronger.
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Say's Law is the claim that the aggregate value of goods and services produced necessarily:
A. increases over time. B. will decrease over time. C. creates a smaller value of aggregate demand for those goods. D. creates an equal value of aggregate demand for those goods.
Refer to the figure above. What is the equilibrium price and quantity of the light bulbs?
A) Equilibrium price = $25, Equilibrium quantity = 0 units B) Equilibrium price = $25, Equilibrium quantity = 15 units C) Equilibrium price = $15, Equilibrium quantity = 15 units D) Equilibrium price = $5, Equilibrium quantity = 15 units
The pure monopolist who is nondiscriminating must decrease price on all units of a product sold in order to sell additional units. This explains why:
A. a monopoly has a perfectly elastic demand curve. B. there are barriers to entry in pure monopoly. C. marginal revenue is less than average revenue at all levels of output. D. total revenues are greater than total costs at the profit-maximizing level of output.
Using Figure 9.1, the amount of autonomous consumption is
A. $500 billion. B. Equal to disposable income when the consumption line crosses the 45-degree line. C. Different at every income level. D. $750 billion.