When Pepsi becomes more expensive relative to other beverages, people will purchase less Pepsi. This observation is known as the:
a. diamond-water paradox.
b. law of diminishing marginal utility.
c. substitution effect.
d. income effect.
c
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Current income minus spending on current needs equals:
A. transfers. B. wealth. C. saving. D. investment.
Suppose the production function for T-shirts can be represented as q = L0.25K0.75. Show that the production function has constant returns to scale
What will be an ideal response?
A market equilibrium:
A. leaves unexploited opportunities for individuals. B. is never socially optimal. C. might not maximize total economic surplus. D. is socially optimal.
Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary