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Chapter 1: Q 7RQ. (page 9)
What is income effect?
The income effect encourages a utility-maximizer to buy more of both goods if utility rises or less of both goods if utility falls.
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What stops oligopolists from acting together as
a monopolist and earning the highest possible level of profits?
In the Keynesian framework, which of the following events might cause a recession? Which might cause inflation? Sketch AD/AS diagrams to illustrate your answers.
a. A large increase in the price of the homes people own.
b. Rapid growth in the economy of a major trading partner.
c. The development of a major new technology offers profitable opportunities for business.
d. The interest rate rises.
e. The good imported from a major trading partner become much less expensive.
Residents of the town of Smithfield like to consume hams, but each ham requires 10 people to produce it and takes a month. If the town has a total of 100 people, what is the maximum amount of ham the residents can consume in a month?
What are the three ways that societies can organize themselves economically?
Why do indifference curves slope down?
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