After the price of Revlon nail polish increased, Jen stopped buying Revlon nail polish and started buying a cheaper brand of nail polish instead. This is called:
A. the income effect of a price change.
B. a decrease in the seller's reservation price.
C. a decrease in the buyer's reservation price.
D. the substitution effect of a price change.
Answer: D
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A perfectly competitive firm's supply curve is its
A) marginal cost curve above its minimum average fixed cost. B) marginal cost curve above its minimum average total cost. C) marginal cost curve. D) marginal cost curve above its minimum average variable cost.
Stagflation refers to
a. inflation that rises and falls from year to year. b. increasing output above full-employment levels and thus fueling inflation. c. sluggish production combined with inflation. d. staggered decreases in the money supply designed to lower inflation.
Suppose Country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country. The numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. 'W' is the wage rate and 'r' is the rental rate of land.Price of wheat = 1w + 2rPrice of cloth = 2w + 1rSuppose Country A engages in free trade and the price of cloth increases from $3 per unit to $4 per unit. The price of wheat remains unchanged at $3 per unit. The wage rate and the rental rate change to ________ and ________, respectively.
A. $4/7; $5/7 B. $1; $5/3 C. $5/3; $2/3 D. $3/2; $1
Which of the following is most liquid?
A) a mutual fund share B) a government bond C) a corporate bond D) a dollar bill