When the income elasticity of demand for a good is negative, the good is called a luxury good
a. True
b. False
Indicate whether the statement is true or false
False
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Bobby spends $100 per month on pizza and CDs. His utility from these goods is shown in the table above. The price of a pizza is $10 and the price of a CD is $20. Bobby currently buys 2 pizzas and 6 CDs
To maximize his utility in the next period, he should A) buy more pizza and fewer CDs. B) buy more CDs and fewer pizza. C) buy more of both goods. D) stay with the current combination of goods.
Suppose that there are only two types of used cars, peaches and lemons. Peaches are worth $10,000 and lemons are worth $4,000. Without effective signals such as warranties, the owners of peaches cannot sell their cars for $10,000 because the
A) owners of peaches cannot convince buyers that their cars are worth $10,000. B) buyers cannot convince owners of peaches to sell their cars for $10,000. C) owners of lemons cannot convince buyers that their cars are worth more than $4,000. D) buyers cannot convince owners of lemons to sell their cars for $4,000.
In general, which of the following do NOT tend to increase trade between two countries?
A) linguistic and/or cultural affinity B) historical ties C) larger economies D) mutual membership in preferential trade agreements E) the existence of well controlled borders between countries
Define the following terms and explain their importance to the study of economics
a. common stock b. corporation c. limited liability d. plowback