Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the substitution effect can be represented by a movement from
A) point A to point E.
B) point A to point G.
C) point F to point G.
D) point A to point F.
Ques. 2The average total cost curves for Plant 1, ATC0, and Plant 2, ATC1, are shown in the figure above. Over what range of output is it efficient to operate Plant 2?
A) 0-20
B) 0-25
C) 20-25
D) greater than 25
Ques. 3In a bilateral monopoly, the wage rate is likely to be ________ than the value of marginal product of labor and ________ than in a pure monopsony.
A) lower; lower
B) lower; higher
C) higher; lower
D) higher; higher
Ques. 4In the figure above, a single-price unregulated monopoly sets a price equal to
A) a.
B) b.
C) c.
D) d.
Ques. 5In an unregulated, competitive market, less than the efficient quantity of education is produced and consumed because
A) the decisions to produce and consume education are based on marginal private costs and marginal private benefits.
B) the decisions to produce and consume education are based on marginal social costs and marginal social benefits.
C) the decisions to produce and consume education are based on marginal private benefits and marginal social costs.
D) marginal private costs are consistently greater than marginal private benefits.
Ques. 6The concept of inferior goods can be used to show that
A) lower prices signal poorer quality.
B) indifference curves can have positive slopes.
C) being able to consume more of all goods does not mean that a person will consume more of every good.
D) consumers will always buy more of all products if their incomes increase.
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