Megan took a pay cut from $10 an hour to $7 an hour. As a result of the wage decrease, Megan desires to work less hours and take more hours of leisure. For Megan
A. the substitution effect must be zero.
B. the income effect dominates the substitution effect.
C. the substitution effect dominates the income effect.
D. the substitution effect must equal the income effect.
Answer: C
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Raising the federal funds rate shifts the aggregate demand curve ________ so that real GDP ________ and the price level ________
A) rightward; increases; rises B) leftward; decreases; rises C) rightward; increases; falls D) leftward; decreases; falls E) leftward; increases; rises
There are multiple models of pricing behavior in oligopolistic markets because
a. it is difficult to predict how rival firms will react to any pricing decision b. the demand curve slopes upward for these firms c. firms could earn profit in the long run unlike other markets d. price has a direct impact on profit for a firm in oligopoly e. the products are not identical in terms of quality, image, location
One result of asymmetric information in the market for used cars is that
a. few used cars are offered on the market b. few lemons are sold c. more lemons may be offered for sale than good cars d. buyers benefit at the expense of sellers e. good cars will sell for more than they are worth
Most economists:
A. oppose free trade. B. would prefer to have no trade with other nations. C. favor free trade. D. have no opinion on free trade.