Consider the market for chicken. Assuming that chicken and beef are substitutes, an increase in the price of beef will:
A. decrease the demand for chicken creating a lower price and a smaller amount of chicken purchased in the market.
B. decrease the supply of chicken creating a higher price and a smaller amount of chicken purchased in the market.
C. increase the demand for chicken creating a higher price and a greater amount of chicken purchased in the market.
D. increase the supply of chicken creating a lower price and a greater amount of chicken purchased in the market.
Answer: C
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Lisa is buying bread and at her current purchases, the marginal utility (in dollars) is less than price. If she wants to optimize, she should
A. reduce bread consumption, thus raising P to the level at which MU = P. B. reduce bread consumption, thus raising MU to the level at which MU = P. C. increase bread consumption, thus raising P to the level at which MU = P. D. increase bread consumption, thus lowering MU to the level at which MU = P.
The price elasticity of demand measure is generally stated as an absolute value.
Answer the following statement true (T) or false (F)
In the basic two-period model,
A) credit markets have frictions. B) the government borrows at a lower interest rate than do consumers. C) some consumers will always default on their debts. D) consumers do not default on their debts.
Real wages in the United States tend to rise at the same rate as
a. prices. b. tax rates. c. average productivity levels. d. inflation.