Suppose the price of a good rises. The income effect
A) shows the change in consumption that results from the change in relative price while staying on the same indifference curve.
B) shows the change in consumption that results from the change in relative price while keeping income constant.
C) is shown by decreasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change.
D) is shown by increasing income at the new relative price in order to move from the old indifference curve to the new indifference curve after the price change.
C
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Suppose the following information is known about a market:
1. Sellers will not sell at all below a price of $2. 2. At a price of $10, any given seller will sell 10 units. 3. There are 100 identical sellers in the market. Assuming a linear supply curve, use this information to derive the market supply curve.
In an economy in which velocity is constant and real output grows at an average rate of 3 percent per year, a 5 percent average rate of growth in the money supply would result in a
a. constant price level. b. low (approximately 2 percent) rate of inflation. c. decline in the general level of prices at an annual rate of approximately 2 percent. d. rate of inflation of approximately 8 percent.
Suppose that a firm's long-run average total costs of producing hand-crafted chairs is $300 when it produces 10,000 chairs and $325 when it produces 11,000 chairs. For this range of output, the firm is likely experiencing
a. economies of scale. b. constant returns to scale. c. specialization. d. coordination problems.
Which of the following statements is not correct?
a. In a long-run equilibrium, marginal firms make zero economic profit. b. To maximize profit, firms should produce at a level of output where price equals average variable cost. c. The amount of gold in the world is limited. Therefore, the gold jewelry market probably has a long-run supply curve that is upward sloping. d. Long-run supply curves are typically more elastic than short-run supply curves.