Suppose that the income elasticity of demand for good X is greater than 1. Other things being equal, which of the following statements is incorrect?
A. Good X is a normal good.
B. The quantity demanded of good X decreases as a consumer's income declines.
C. A consumer buys more X as income rises, but the share of income spent on good X falls.
D. A consumer buys more X as income rises and the share of income spent on good X also rises.
Answer: D
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Monopolistic competitors and perfect competitors are alike in: a. facing horizontal demand curves
b. earning zero economic profit in the short run. c. earning zero economic profit in the long run. d. relying on advertising to attract buyers to their products.
A movement downward and to the left along a supply curve is called a(n)
a. increase in supply. b. decrease in supply. c. decrease in quantity supplied. d. increase in quantity supplied.
If production is occurring where marginal cost exceeds price, the purely competitive firm will:
A. maximize profit, but resources will be underallocated to the product. B. maximize profit, but resources will be overallocated to the product. C. fail to maximize profit and resources will be overallocated to the product. D. fail to maximize profit and resources will be underallocated to the product.
Refer to the table below. The equilibrium dollar price of a euro in the above market would be:
The following table gives hypothetical data on the dollar price of Euros.
A. $1.00
B. $1.05
C. $1.10
D. $1.15