According to the substitution effect, an increase in the price of oranges will:
a. cause consumers to consume fewer apples because more money is spent on oranges
b. cause consumers to spend more on oranges because a higher price signals that oranges are better than apples.
c. cause consumers to replace some oranges with other fruit that is now relatively cheaper than oranges.
d. leave consumers with less money to spend on all goods.
c
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If the price elasticity of demand for a good is greater than one, then the demand for that good is:
A. unit elastic. B. perfectly elastic. C. inelastic. D. elastic.
If real GDP per person is above the subsistence level then, according to classical growth theory,
A) the population will increase. B) the standard of living will continue to improve. C) the population will decrease. D) labor productivity will increase. E) more technological advances occur.
Chile is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Chile imposes a $7 tariff on chips. Which of the following outcomes is possible?
a. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips decreases; and the quantity of chips imported by Chile decreases. b. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile decreases. c. The price of chips in Chile increases to $19; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile decreases. d. The price of chips in Chile increases to $16; the quantity of Chilean-produced chips increases; and the quantity of chips imported by Chile does not change.
Suppose that there are two firms, each generating three tons of SO2. Suppose also that the government has set a target abatement level of two tons. Under a policy of uniform abatement with permits, the firm with the lower marginal abatement cost:
A. will abate exactly the same amount of SO2 as the firm with the higher marginal abatement cost. B. will abate less SO2 than the firm with the higher marginal abatement cost. C. will abate more SO2 than the firm with the higher marginal abatement cost. D. will sell its pollution permit to the firm with the higher marginal abatement cost.