It is estimated that a 5 percent decline in income will reduce health care purchases by 2.5 percent and reduce dental service purchases by 8 percent. From this information, one can conclude that:
A. health care is a luxury and dental services are necessities.
B. both health care and dental services are necessities.
C. both health care and dental services are luxuries.
D. health care is a necessity and dental services are a luxury.
Answer: D
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Economists believe that people who force themselves to always eat everything on their plate at a restaurant, regardless of how full they might feel, likely do so because:
A. they gain negative utility from insulting the chef. B. they overvalue the opportunity costs of their health and time involved with eating food they don't really want. C. they include the sunk cost of their meals in making their decision. D. they undervalue the true benefit of eating too much.
According to the theory of utility maximization,
a. people who buy tap water apparently feel the additional benefit (compared with bottled water) offsets the additional cost b. people who buy bottled water apparently feel the additional benefit (compared with tap water) offsets the additional cost c. the marginal utility of the last gallon of bottled water consumed exceeds the marginal utility of the first gallon of tap water consumed d. the marginal utility of bottled water exceeds the marginal utility of diamonds e. bottled water must be more expensive (per gallon) than tap water
The free-rider problem makes a good profitable to provide by a private firm.
Answer the following statement true (T) or false (F)
Which one of the following is a normative economic statement?
A. The unemployment rate fell for the fourth straight month, reflecting the effects from stronger economic growth in the second quarter B. The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy C. Consumer prices are rising at a faster rate than in past months, indicating a renewal of inflationary pressures on the economy D. To help balance the Federal budget, Congress increased the tax on gasoline to its highest level in the past ten years