What is the benefit of understanding the income and the substitution effects?
A) The income effect might run in the opposite direction of the substitution effect.
B) The income effect always runs in the opposite direction of the substitution effect.
C) The income and substitution effects just offset each other, which explains a lot.
D) The income and substitution effects are proportional to each other.
A
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Refer to Figure 2-5. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W?
A) 2 million tons of steel B) 16 million tons of paper C) zero D) 9 million tons of paper
What are some of the likely consequences of price ceilings on agricultural inputs?
What will be an ideal response?
Bonnie gets her hair cut at her usual salon and is very happy with the results. Later that afternoon, she goes to the mall and sees that a hair salon is giving away free haircuts only on that day. If Bonnie does not take advantage of the giveaway, it is because the:
a. marginal utility of the next haircut would be zero or negative. b. marginal utility of the next haircut would increase. c. marginal utility of the next haircut would be zero or positive. d. total utility of both haircuts would be zero or negative. e. total utility of both haircuts would be higher than just one haircut.
According to supply-side economics, a(n) ________ in the tax rate tends to increase the labor supply and ________ aggregate output.
A. decrease; increase B. increase; decrease C. decrease; decrease D. increase; increase