When Pepsi becomes more expensive relative to other beverages, people will purchase less Pepsi. This ...

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.

QUESTION 2

____ is the act of buying a commodity in one market at a lower price and selling it in another market at a higher price.
 a. Buying short.
  b. Discounting.
  c. Tariffing.
  d. Arbitrage.

QUESTION 3

Assume the price of Nikes decreases. As a result, consumers increase the quantity of Nikes purchased each year and purchase fewer Reeboks. This is an example of the:
 a. substitution effect.
  b. income effect.
  c. utility effect.
  d. consumption effect.

QUESTION 4

Which of the following represents an arbitrage transaction?
 a. Traders buy silks where they are abundant and cheap, and haul them along a trail to another place where they would be quite scarce and valued.
  b. A trader buys a block of government bonds in one market where it is temporarily priced below where it can be immediately resold in a different market.
  c. Someone buys a block of Final Four tickets and scalp them at the game.
  d. A senior citizen buys a block of theater tickets at a senior discount and scalps them to teenagers behind the theater.
  e. All of the above are example of arbitrage.

QUESTION 5

Assume the price of Advil increases. As a result, you decrease the quantity of Advil purchased each month and purchase more Tylenol. This is an example of the:
 a. income effect.
  b. utility effect.
  c. consumption effect.
  d. substitution effect.

QUESTION 6

One of the necessary conditions for price discrimination to occur is that:
 a. buyers in different markets have different elasticities of demand.
  b. the demand curve is upward sloping.
  c. buyers must be allowed to resell the good at a higher price elsewhere.
  d. all of these are necessary for price discrimination to occur.

QUESTION 7

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity demanded because buyers:
 a. purchase more complementary goods.
  b. purchase more substitute goods.
  c. purchase fewer substitute goods.
  d. have more real income.

QUESTION 8

For a monopoly to successfully price discriminate, its customers must:
 a. feel that the product is a necessity.
  b. have identical demands.
  c. be unable to resell the product.
  d. actively engage in arbitrage.