For normal goods
A. the substitution effect of a price decrease will decrease the quantity of the good demanded while the income effect of a price decrease will increase the quantity of the good demanded.
B. the substitution and income effects of a price decrease will both increase the quantity of the good demanded.
C. the substitution effect of a price decrease will increase the quantity of the good demanded while the income effect of a price decrease will decrease the quantity of the good demanded.
D. the substitution and income effects of a price decrease will both decrease the quantity of the good demanded.
Answer: B
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Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?
a. Your real wage fell. b. Your nominal wage fell. c. Both your nominal and real wages decreased. d. Although your nominal wage fell, your real wage increased. e. Both your nominal and real wages increased.
Total surplus:
A. is the total amount spent on a good in a market. B. is producer surplus minus consumer surplus. C. is producer and consumer surplus combined. D. is consumer surplus minus producer surplus.
Individual supply curves generally slope ________ because ________.
A. downward; sellers become more efficient with practice. B. downward; inputs are cheaper when purchased in high volume. C. upward; profits increase with quantity. D. upward; of increasing opportunity costs.
Forward contracts
A) are highly liquid. B) entail small information costs. C) provide little risk sharing. D) are subject to default risk.