The substitution effect occurs because when the price of one good increases, consumers will buy fewer substitute goods.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2A firm is operating at a scale where diseconomies of scale are present. Which of the following could help explain what that means?
a. The firm is operating at a scale where the average total cost of production is falling as output expands.
b. The firm is operating at a scale where total fixed costs are not minimized.
c. The firm is operating at a scale where average total cost is constant as output expands.
d. The firm has grown so large that average total cost increases as output expands.
QUESTION 3The U.S. bond rating was devalued from AAA to AA+ in 2011 due to the rise in government debt.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4When multiple facts about a sample set are known, a(n) _____ heuristic makes the choice on the basis of the first category of facts in which the samples differ.
a. elimination
b. representative
c. recognition
d. availability
QUESTION 5A price change triggers the income effect but not the substitution effect.
a. True
b. False
Indicate whether the statement is true or false
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