Related to the Economics in Practice on page 318: A company selling iced tea discovers that as sugar is added to tea, customers' opinions of the taste of the tea rises for the first few grams of sugar and then drops. Even so, the company chooses not to add the amount sugar that would result in the best-tasting tea. Which of the following would explain why adding less sugar could be a wise decision?
A. Teas with less sugar are more likely to appeal to health-conscious consumers.
B. Many products in the cold drink market are sold with substitutes for sugar, such as high fructose corn syrup.
C. Manufacturers of tea are required to clearly indicate the amount of sugar in their products.
D. The price of sugar added to tea is much less significant than the price of other ingredients, such as tea leaves.
Answer: A
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Candidates in a two-person race express very similar positions a few weeks before the election. A voter complains that there is not much difference between the two candidates. What this voter misunderstands or ignores is that
A) each candidate has an incentive to be like the other. B) each candidate has an incentive to be different from the other. C) each candidate has an incentive to be perceived as in the "middle of the road," and if both candidates correctly act on this incentive they will end up sounding alike. D) this simply happens sometimes. E) none of the above
If the economy is experiencing excess demand that is causing inflation, the inflationary pressures can be eliminated by reducing government spending by less than the amount of excess demand.
Answer the following statement true (T) or false (F)
A depression is different from a recession in that
A. a recession has inflation and a depression does not. B. a depression is much worse. C. a depression has inflation and a recession does not. D. a recession is much worse.
If there is more production of final goods in the economy, then income ___.
A. will fall B. might fall C. will rise D. might rise