The fact that consumers will purchase more of a good that has become relatively cheaper
A. is called the nominal income effect.
B. leads to negative marginal utility.
C. leads to an upward sloping demand curve.
D. is called the substitution effect.
Answer: D
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If consumers' surplus is $30 and the price paid for the good is $50, then the maximum price a buyer is willing and able to pay for the good is
A) $80. B) $30. C) $50. D) $20. E) There is not enough information to answer the question.
In 2009-2010 the federal government
A) achieved a budget surplus for the first time in more than a decade. B) ran a budget surplus, and this reduced the size of the national debt. C) financed approximately 40 percent of its expenditures through borrowing. D) ran a budget deficit, and this reduced the size of the national debt.
Which of the following would economists label as an example of the "tragedy of the commons?"
A. The over-fishing of the oceans B. The use of pesticides on private farm land C. The use of growth hormone on cattle D. The neighbor who does not mow his yard
The development of market power by a firm is considered to be a market failure because firms with market power will
A. Produce more and charge a lower price than what would be socially optimal. B. Not respond to consumer demand. C. Tend to ignore external costs. D. Produce less and charge a higher price than what would be socially optimal.