If a person claims, "I wouldn't eat anchovies if you paid me," we can assume that his marginal utility of anchovies is
A. positive.
B. positive, but decreasing.
C. negative.
D. zero.
Answer: C
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? According to Figure 5-13, if the price of good X falls, the optimal combination will move
A. from U1to a point on a higher indifference curve, such as U3. B. from U2to a point on a higher indifference curve, such as U3. C. from U1to a point on a higher indifference curve, such as U3. D. from U2to a point on a higher indifference curve, such as U1.
Income elasticity is defined as the
A) percentage change in the quantity demanded of a good resulting from a change in income. B) percentage change in the demand of a good resulting from a one percent change in income. C) change in quantity demanded resulting from a change in income. D) percentage change in the quantity demanded of a good resulting from a one percent change in income.
In the short run, if the price level rises, then the overall economy can temporarily produce beyond its nominal capacity. One reason for this is that
A. existing capital equipment can be used more intensively. B. wage rates rise almost simultaneously with the price level. C. the unemployment rate usually rises dramatically along with the price level. D. workers can be switched from counted to uncounted production.
Suppose that at the current price producers of CDs offer 5 million CDs for sale but consumers want to buy 6 million. When the market coordinates the demand and supply for CDs, the price of CDs will:
A. rise. B. fall. C. stay the same. D. be fixed by the government.