Consider the following statements:
a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only
B) b only
C) c only
D) a and b
E) a, b, and c
Answer: E
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Consider estimating a consumption function from a large cross-section sample of households. Assume that households at lower income levels do not have as much discretion for consumption variation as households with high income levels
After all, if you live below the poverty line, then almost all of your income is spent on necessities, and there is little room to save. On the other hand, if your annual income was $1 million, you could save quite a bit if you were a frugal person, or spend it all, if you prefer. Sketch what the scatterplot between consumption and income would look like in such a situation. What functional form do you think could approximate the conditional variance var(ui Inome)? What will be an ideal response?
Who makes up the voting members of the Federal Reserve's Open Market Committee?
What will be an ideal response?
Which of the following cost curves always declines continuously as output increases?
a. ATC b. AVC c. AFC d. MC e. TC
One reason given for the U.S. productivity slowdown in the period from 1973-1995 was
a. declining energy prices. b. increasing energy prices. c. increasing investment spending. d. increasing government spending.