Suppose the government spends the same for a particular consumer under two different policies: One subsidizes the price of good x while the other is a lump sum subsidy. Which of the following is true.
A. Compared to the lump sum subsidy, the consumer will purchase more x under the price subsidy if and only if x is a normal good.
B. Compared to the lump sum subsidy, the consumer will purchase less of x under the price subsidy if x is an inferior good.
C. Compared to the lump sum subsidy, the consumer will purchase less of x under the price subsidy if x is a Giffen good.
D. The consumer will spend the same on x under the two policy if and only if her indifference curves are kinked.
E. Both (a) and (c).
F. Both (b) and (c).
G. All of the above.
H. None of the above.
Answer: D
You might also like to view...
The Coase theorem applies when property rights are given
A) to the victim of pollution but not to the polluter. B) to the polluter but not to the victim. C) to either the polluter or the victim. D) neither to the polluter nor to the victim.
Refer to Figure 13-1. Ceteris paribus, a decrease in personal income taxes would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.
What effect does the payment of government unemployment insurance have on the unemployment rate?
What will be an ideal response?
The LRAS curve is ____ with real output levels that ____
a. upward sloping; vary positively with the price level b. upward sloping; vary negatively with the price level c. vertical; are equal to the natural level of real output at all price levels d. vertical; can be either greater than or less than the natural level of real output