Good X is an inferior good but not a Giffen good. When the price of X increases, the consumer will consume
a. more X.
b. the same amount of X.
c. less X.
d. more or less X depending on the size of the income effect relative to the size of the substitution effect.
c
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In the long run, under perfect competition:
A) firms earn positive economic profit because of economies of scale. B) firms earn positive accounting profit because of government regulations. C) firms earn zero economic profit because of free entry and exit of firms. D) firms earn negative economic profit because of free entry and exit of firms.
Suppose the target exchange rate set by the Fed is 100 guilders per dollar. If the demand for dollars temporarily decreases, to maintain the target exchange rate, the Fed can
A) sell dollars. B) buy dollars. C) increase U.S. exports. D) increase U.S. imports.
Which of the following is not a characteristic of monopolistically competitive firms in the long run:
A. firms earns zero profits B. each firm maximizes profits. C. firms charge a price above marginal cost. D. there is no deadweight loss.
The use of abstraction in economics is analogous to the use of a road map providing directions to a location.
Answer the following statement true (T) or false (F)