The substitution effect is
A. always greater than the income effect.
B. always less than the income effect.
C. sometimes less than the income effect.
D. never greater than the income effect.
Answer: C
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The demand curve for a monopoly is
A) horizontal because the demand is perfectly elastic. B) downward sloping. C) vertical because the demand is perfectly inelastic. D) upward sloping. E) undefined because it is the only supplier in the market.
Most real economic choices involve small (or marginal) changes, rather than all-or-nothing decisions
a. True b. False
If a price ceiling is set below the equilibrium price in a market
A. surpluses of the commodity will develop. B. rationing will be unnecessary. C. the quantity supplied will exceed the quantity demanded. D. the quantity demanded will exceed the quantity supplied.
Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?
A. No, average total costs have increased which means the company is not minimizing losses. B. Yes, because average variable costs are always less than average total costs. C. No, the previous level of output was the most efficient because it had the lowest average total cost. D. Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.