According to the law of demand, other things being equal
A) when the price a good goes up, then people buy more of that good.
B) when the price a good goes down, then people buy more of that good.
C) when people's income goes down, then they buy less of a good.
D) when people's income goes up, then they buy less of a good.
Answer: B
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When ________ in a market, the total net benefit to society is maximized
A) deadweight loss is maximized B) consumer surplus is minimized C) producer surplus is minimized D) a competitive equilibrium is achieved
Max has allocated $100 toward meats for his barbecue. His budget line and an indifference map are shown in the above figure. What happens if Max's mother gives him 30 pounds of burger?
A) Max would have preferred receiving the dollar-value of the burger. B) Max is indifferent between this gift and the dollar-value of the burger. C) Max prefers this gift to the dollar-value of the burger. D) None of the above.
Look at this producer surplus graph. Suppose that Herb is a wheat farmer who grows only a small crop because he cannot make much profit at P1. When the price moves to P2, what is Herb most likely to do?
a. Begin planting an even smaller crop.
b. Begin planting a larger crop.
c. Quit growing wheat completely.
d. Wait to sell his wheat until the price returns to P1.
If the production of a product or service involves external or spillover benefits, then the government can improve efficiency in the market by:
A. imposing a corrective tax to correct for an overallocation of resources. B. providing a subsidy to correct for an underallocation of resources. C. imposing a corrective tax to correct for an underallocation of resources. D. providing a subsidy to correct for an overallocation of resources.