When interest rates decrease, the substitution effect suggests that individuals will
A. consume more in the future.
B. consume more today.
C. save more today.
D. save more and consume less today.
Answer: B
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Suppose that, at a given production plan, the marginal product of labor is 6 and the marginal product of capital is 3. In a graph with labor on the horizontal and capital on the vertical axis, this implies that the technical rate of substitution at that production plan is
A. -1/2 B. -2 C. -18 D. None of the above
Jeanie Reuter and Ruth Oslen are tenants in first and second floor apartments. Jeanie practices her piano lessons in the morning, while Ruth practices aerobics on drum beats at the same time. Further assume that the value of the practice to Jeanie is $10 while the value of aerobic exercises to Ruth is $6 . Which of the following is a feasible solution to the problem if the cost of negotiation is
zero? a. Ruth will pay Jeanie $6 to make her change the time for piano practice. b. Ruth will pay Jeanie $10 to make her change the time for piano practice. c. Jeanie will pay Ruth $4 to make her change the time for aerobics exercises. d. Jeanie will pay Ruth $6 to make her change the time for aerobics exercises.
Risk-averse people prefer to hold assets whose returns are positively correlated
Indicate whether the statement is true or false
If consumers desire choice
A) network effects with be minimized. B) network effects are enhanced. C) networks shift back to a previous technology. D) government will regulate variety.