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1. If pasta is an inferior good and if the price of pasta increases, the income effect the quantity demanded, and the substitution effect the quantity demanded. A) reduces; decreases B) increases; increases C) reduces; increases D) increases; decreases

1. If pasta is an inferior good and if the price of pasta increases, the income effect the quantity demanded, and the substitution effect the quantity demanded. A) reduces; decreases B) increases; increases C) reduces; increases D) increases; decreases

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.13P
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I. Part 1: Multiple choices 1. If pasta is an inferior good and if the price of pasta increases, the income effect the quantity demanded, and the substitution effect the quantity demanded. A) reduces; decreases В) increases; increases C) reduces; increases D) increases; decreases 2. An implication of part I of the Coase theorem is that in the presence of externalities, government: A) should primarily establish property rights to prevent market failure. B) should primarily use taxes to prevent market failure. C) should primarily use subsidies to prevent market failure. D) can do nothing to prevent market failure. 3. Which of the following is TRUE when there is optimal provision of a public good? A) marginal cost equals marginal rate of substitution for each consumer B) each consumer's surplus equals marginal cost C) total consumer surplus equals marginal cost D) the sum of all consumers' marginal rates of substitution equals marginal cost 4. Suppose a high-speed rail system is proposed that will save commuters from the suburbs a lot of valuable time. If the high-speed rail system is built, the value of homes in the suburbs will increase because of the easier commute. When estimating the potential benefits of the high-speed rail system: A) it is important not to double count benefits since the rise in home values is caused by the time savings. it is important to count both the rise in home values and the value of time saved by В) commuters. C) neither the rise in home values nor the value of time saved by commuters is considered a benefit of investing in the high-speed rail system. D) the increased value of suburban homes is considered a cost rather than a benefit. Page 1 5. In private equilibrium, a positive production externality will lead to negative consumption externality will lead to A) SMC less than PMC; SMC greater than PMC SMC less than PMC; SMC less than PMC : a B) SMB less than PMB; SMC greater than PMC C) D) SMC less than PMC; SMB less than PMB
Transcribed Image Text:I. Part 1: Multiple choices 1. If pasta is an inferior good and if the price of pasta increases, the income effect the quantity demanded, and the substitution effect the quantity demanded. A) reduces; decreases В) increases; increases C) reduces; increases D) increases; decreases 2. An implication of part I of the Coase theorem is that in the presence of externalities, government: A) should primarily establish property rights to prevent market failure. B) should primarily use taxes to prevent market failure. C) should primarily use subsidies to prevent market failure. D) can do nothing to prevent market failure. 3. Which of the following is TRUE when there is optimal provision of a public good? A) marginal cost equals marginal rate of substitution for each consumer B) each consumer's surplus equals marginal cost C) total consumer surplus equals marginal cost D) the sum of all consumers' marginal rates of substitution equals marginal cost 4. Suppose a high-speed rail system is proposed that will save commuters from the suburbs a lot of valuable time. If the high-speed rail system is built, the value of homes in the suburbs will increase because of the easier commute. When estimating the potential benefits of the high-speed rail system: A) it is important not to double count benefits since the rise in home values is caused by the time savings. it is important to count both the rise in home values and the value of time saved by В) commuters. C) neither the rise in home values nor the value of time saved by commuters is considered a benefit of investing in the high-speed rail system. D) the increased value of suburban homes is considered a cost rather than a benefit. Page 1 5. In private equilibrium, a positive production externality will lead to negative consumption externality will lead to A) SMC less than PMC; SMC greater than PMC SMC less than PMC; SMC less than PMC : a B) SMB less than PMB; SMC greater than PMC C) D) SMC less than PMC; SMB less than PMB
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