A consumer has been buying 2 magazines and 2 books a month for many months. The price of books then increases. To attain a new optimum, the consumer will
A. buy more books because they are now relatively more valuable than they were before.
B. buy the same number of books and magazines as before because they provide different types of utility.
C. buy fewer books than before because they are relatively more expensive than they were before.
D. buy more magazines because they are now relatively more valuable than they were before, while continuing to buy the same number of books.
Answer: C
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What are the major problems that will tend to arise if there are legal limits on the movement of prices?
A. Favoritism and corruption of officials and market participants B. Unenforceability of laws and higher costs of transactions C. Increasing restrictions to enforce the laws D. Misallocation of resources as prices no longer correspond to costs E. All of these responses are correct.
Which of the following acts prohibits two competitors from merging with one another for the purpose of reducing competition?
A) the Sherman Act B) the Clayton Act C) the Federal Trade Commission Act D) the Robinson-Patman Act
If the government were to increase income taxes, we would predict:
A. a downward movement along the aggregate demand curve. B. a shift in aggregate demand to the right. C. a shift in aggregate demand to the left. D. an upward movement along the aggregate demand.
Monopolistic competition is characterized by
A. a standard, undifferentiated product. B. a horizontal demand curve faced by all firms. C. relative ease of entry into the market. D. persistent long-run economic profits.