According to the permanent income hypothesis, a temporary and relatively small increase in income would
A. cause an increase in consumption and saving by the same amount.
B. cause a decrease in consumption and saving by the same amount.
C. cause no change in consumption.
D. cause a large increase in consumption.
Answer: C
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A firm's marginal factor cost describes
A) the increase in the firm's total revenue as one more unit of output is sold. B) the change in total fixed cost that results from hiring one more unit of input. C) the change in total variable cost that results from the production of an extra unit of output. D) the change in total cost that results from using one more unit of an input.
"If you hadn't gone to dinner with your friends, you would have stayed home and watched television." It follows that
A) watching television is the opportunity cost of having dinner with your friends. B) the price of having dinner with your friends is more than the price you would have had to pay to watch television. C) the opportunity cost of having dinner with your friends is lower than the opportunity cost of watching television. D) it is less costly to watch television than to have dinner with your friends.