Suppose the price of butter falls because milk price supports are removed. Will people’s tastes shift away from margarine and toward butter?
What will be an ideal response?
No. This change in relative prices will result in a change in consumption but will not affect preferences. The indifference map, which reflects tastes, does not change when prices of goods change. Nevertheless, we are likely to see butter consumption increase as a result of the lower price.
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The problems of asymmetric information exchange arise ultimately because
a. one party to the exchange possesses different information than another b. one party has more information than another c. one party knows nothing d. one party cannot independently verify the information of another e. information is scarce
Which of the following is a reason for the law of increasing opportunity cost? a. Some goods have limited alternative uses
b. Not all resources are equally adaptable to other uses. c. Prices of specific final goods increase as more of those goods are produced. d. Prices of specific final goods decrease as more of those goods are produced.
A decrease in both equilibrium price and quantity could be produced by a(n)
a. decrease in supply, with demand constant b. increase in supply, with demand constant c. decrease in demand, with supply constant d. increase in demand, with supply constant e. improvement in technology
Dilbert's Incorporated produced 5,000,000 units of accounting software in 2010 . At the start of 2011 the pointy-haired boss reduced total annual hours of employment from 10,000 to 8,000 and production was 4,800,000 . These numbers indicate that productivity
a. fell by 4%. b. fell by 20%. c. rose by 12%. d. rose by 20%.