?
If a consumer is currently at Point E on Figure 5-13, she will
A. choose to move to the combination at C to make herself better off.
B. choose to move to the combination at D to make herself better off.
C. reduce expenditures to make herself better off.
D. stay at Point E, since that combination is the cheapest alternative to be on indifference curve U1.
Answer: B
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Suppose Joe purchases 10 lottery tickets per month when his monthly income is $200. Joe receives a raise at work, giving him an extra $40 per month in take-home pay, and Joe now purchases 15 lottery tickets per month. What is Joe's income elasticity of demand for lottery tickets?
a. 2.5 b. 1. c. 0.4. d. 0.25.
Suppose we plot the total revenue curve with quantity on the horizontal axis and revenue on the vertical axis (as in Figure 8.1 in the book). Under price-taking behavior, the total revenue curve should be:
A) an inverted U-shaped curve (first increasing and then decreasing). B) a U-shaped curve (first decreasing and then increasing). C) a horizontal line with vertical axis intercept equal to the market price. D) a straight line from the origin with slope equal to the market price.
Knowing that the presence of externalities reduces surplus, it implies that:
A. there are mutually beneficial trades waiting to be exploited, so government has an incentive to force those parties to solve the problem themselves. B. government needs to find them and correct the market. C. there are mutually beneficial trades waiting to be exploited so private parties have an incentive to solve the externality problem themselves. D. None of these statements is true.
The difference between the economic and political functions of government is that
A) the economic function is concerned with the Federal Taxation system while the political function is not. B) the economic function is concerned with correcting for market failures while the political function is not. C) the economic function is concerned with the reallocation of income while the political function is not. D) the economic function encourages merit goods while the political function discourages demerit goods.