Refer to Table 10-5, which lists the values of Harry Taber's marginal utility and marginal utility per dollar for Italian submarine (sub) sandwiches and tacos. Assume that the price of a sub sandwich is $4 and the price of a taco is $2
When Harry's income is $14, he buys two Italian sub sandwiches and three tacos. The last column lists the values of the marginal utility per dollar for tacos when the price of a taco decreases to $1. Complete this statement: As a result of the change in price
A) Harry's purchasing power has increased. He will reduce his consumption of tacos so he can buy one more sub. This is an example of the substitution effect of a price change.
B) Harry's purchasing power has increased. Harry buys fewer tacos. This is an example of the substitution effect of a price change
C) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy fewer tacos. This is an example of the income effect of a price change.
D) Harry's purchasing power has increased. If tacos are a normal good for Harry he will buy more tacos. This is an example of the income effect of a price change.
D
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Marla is an architect who is designing a home for Chuck. Chuck is paying Marla $150 per hour to design his new home. When Chuck and Marla get married, Marla continues to work on designing the home, but she no longer charges Chuck for her work
As a result, GDP ________ because ________. A) falls; Marla's architectural design services are no longer bought by Chuck once they're married B) falls; Marla's work becomes less valuable once she's married C) rises; Marla becomes more productive once she's married D) falls; Marla's work takes place in the underground economy once she's married
If substantial economies of scale exist, setting price = MC will
a. result in a loss for the firm b. result in an excess profit earned c. yield a normal profit d. cause the firm to produce more than the optimal number of goods e. cause the firm to charge lower than the optimal price
At some rate of interest, i, domestic demand is equal to output, and at some exchange rate, the domestic return is equivalent to the foreign return. This must be one point on:
A) the IS curve. B) the aggregate expenditure line. C) the supply curve. D) the LM curve.
In the Keynesian aggregate expenditures model, "aggregate expenditures" refer to:
A. the amount of GDP that could be produced if unemployment were zero. B. the combined expenditures of consumers, businesses, governments, and foreigners (net exports). C. the amount of demand for consumer goods that would arise if all citizens had all the income they wanted. D. consumer spending measured in constant prices.