Substitution bias
a. is one factor that causes the Consumer Price Index to underestimate the inflation rate
b. is caused by the poor quality of many products
c. is one of the primary causes of inflation
d. involves consumer behavior that helps explain why the Consumer Price Index overestimates the inflation rate
e. suggests most economists substitute other price indices for the flawed Consumer Price Index
D
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The narrowest definition of the money supply is
A) M1. B) M2. C) the difference between M2 and M1. D) the sum of M1 and M2.
The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of the product will
a. go to sellers. b. go to buyers. c. go equally to both buyers and sellers. d. do none of the above.
Abe owns a dog; the dog's barking annoys Abe's neighbor, Jenny. Suppose that the benefit of owning the dog is worth $200 to Abe and that Jenny bears a cost of $400 from the barking. Assuming Abe has the legal right to keep the dog, a possible private solution to this problem is that
a. Jenny pays Abe $150 to give the dog to his parents who live on an isolated farm. b. Abe pays Jenny $350 for her inconvenience. c. Jenny pays Abe $300 to give the dog to his parents who live on an isolated farm. d. There is no private transaction that would improve this situation.
Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. If Hi Phi Unlimited?s total revenue from installing 20 sound systems is $30,000 and its total revenue from installing 21 sound systems is $30,800, what is the marginal revenue of the twenty-first sound system?
A. -$1,500 B. -$700 C. $800 D. $1,467