Refer to Figure 3-1. A decrease in the price of a substitute good would be represented by a movement from
A) A to B. B) B to A. C) D1 to D2. D) D2 to D1.
D
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Ian views playing Wartcraft and drinking soda as perfect complements (one soda with one hour of playing Wartcraft). Currently, sodas are $1 each and Wartcraft costs $1 per hour. Ian has $12 of income
a. Compute Ian's Compensating Variation if the price of Wartcraft rises to $2. b. Compute Ian's Equivalent Variation if the price of Wartcraft rises to $2. c. Compute Ian's change in Consumer Surplus if the price of Wartcraft rises to $2.
A budget deficit is defined as:
A. a shortfall of expenditures compared to revenue. B. accumulated deficits minus accumulated surpluses. C. a shortfall of revenues compared to expenditures. D. accumulated surpluses minus accumulated deficits.
Advocates of stabilization policy prefer quick medicine for economic ills. This leads some observers to favor fiscal policy while others endorse monetary policy. Describe the positions of each side in the debate and what seems to be the current consensus.
What will be an ideal response?
Because resources are not equally well suited to producing all goods,
A. as more of a good is produced the inputs used to produce that good will increase in price. B. as more of a good is produced the quality of that good declines and therefore the costs of production increase. C. the opportunity costs of producing a good will increase as more of that good is produced. D. the opportunity costs of producing a good will decrease as more of that good is produced.