Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that X is a normal good, Y is an inferior good, and the price of good X increases. Then the substitution effect will lead consumers to consume:
A. more of good X and less of good Y.
B. less of good X and more of good Y.
C. more of good X and more of good Y.
D. less of good X and less of good Y.
Answer: B
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Other things constant, if a person prefers to have a good sooner rather than later
A) she is acting like a child. B) she has a negative rate of time preference. C) she has a zero rate of time preference. D) she has a positive rate of time preference.
From the standpoint of economic efficiency, competitive markets provide:
a. less of a public good than would be efficient. b. more of a public good than would be efficient. c. exactly the amount of a public good that is efficient. d. none of these.
Suppose several United States software design companies compete with each other in a perfectly competitive environment. If one company decides to move some of its offices to a low-wage country in order to reduce operating costs, then:
A. the company that moves to the low-wage country will earn a positive economic profit in the long run. B. the company that moves to the low-wage country will soon return to the United States. C. the other companies will still be able to remain profitable while operating solely in the United States. D. other companies will have an incentive move to the low-wage country in order to remain competitive.
Purposeful behavior means that:
A. people are selfish in their decision making.
B. people weigh costs and benefits to make decisions.
C. people are immune from emotions affecting their decisions.
D. decision makers do not make mistakes when weighing costs and benefits.