Suppose two goods coffee and creamer provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield
a. a substitution effect and an income effect in opposite directions.
b. a substitution effect and an income effect in the same direction.
c. a substitution effect but no income effect.
d. an income effect but no substitution effect.
QUESTION 2If products similar to the intermediate good are sold, an approximation to the correct transfer price is
a. average costs
b. average fixed costs
c. average variable costs
d. the market price
QUESTION 3In 2010, the medical specialty that earned the highest rate of return on investment was
a. general primary care.
b. Internal medicine.
c. pediatrics
d. orthopedic surgery
e. none of these
QUESTION 4With only two goods, if the income effect is in the opposite direction as the substitution effect but the income effect dominates then the good is
a. normal
b. inferior but not Giffen
c. Giffen
d. There is not enough information to answer.
QUESTION 5If the fixed costs are relatively large, a relatively good approximation to the correct transfer price is
a. average costs
b. average fixed costs
c. average variable costs
d. the market price
QUESTION 6To address the shortage of physicians on the horizon, it will be necessary to
a. build more medical schools.
b. provide more grants and scholarships for medical education.
c. allow the admission of more foreign-educated physicians.
d. all of these are true.
QUESTION 7With only two goods, if the income effect is in the opposite direction as the substitution effect but the substitution effect dominates then the good is
a. normal
b. inferior but not Giffen
c. Giffen
d. There is not enough information to answer.
QUESTION 8If the fixed costs are relatively small, a relatively good approximation to the correct transfer price is
a. average costs
b. average fixed costs
c. average variable costs
d. the market price
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