Assume the price of good X increases. As a result, your real income decreases and you decrease the quantity of good X purchased each month. This is an example of the:
A. income effect.
B. consumer price effect.
C. revenue effect.
D. substitution effect.
Answer: A
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If a monopolistically competitive firm lowers its price and, as a result, its total revenue decreases then
A) the output effect of the price change was less than the price effect. B) the output effect of the price change was greater than the price effect. C) the substitution effect of the price change was greater than the income effect. D) the firm's demand curve must have decreased.
What are the biggest advantages the U.S. has over the EU in terms of being an Optimum Currency Area?
A) low mobility of labor, higher labor productivity, lower level of intra-regional trade B) high unionization of U.S. Labor force C) high mobility of labor force, more transfer payments between regions D) higher uniformity of population's taste in consumption E) more specialized labor force and natural resource advantages
In the Friedman-Lucas money surprise model, a surprise increase in money supply growth
A) has no effect on inflation. B) increases inflation less than in proportion to the growth rate of the money supply. C) increases inflation in an equal proportion to the growth rate of the money supply. D) increases inflation more than in proportion to the growth rate of the money supply.
In one year, a weapons plant can manufacture either 1,000 more guns or 50 more tanks. The plant's opportunity cost of an extra tank is approximately
a. 20 guns b. 50 guns c. 50 tanks d. 1/50 of a tank e. 1/50 of a gun