In the figure above, suppose the original budget line is BD. A fall in the price of a compact disc will
A) rotate the budget line to AD.
B) rotate the budget line to CD.
C) not move the budget line.
D) result in a parallel leftward shift of the budget line.
B
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A decrease in the discount rate
A) reduces the cost of borrowing from the Fed. B) increases the cost of reserves borrowed from the Fed. C) signals the Fed's desire to decrease the money supply. D) signals the Fed's desire to reduce lending to commercial banks.
Sears and Wal-Mart must decide whether to lower their prices, based on the economic profits shown in the table above. Which of the following is TRUE?
A) This situation is not a prisoners' dilemma. B) If Sears lowers its prices and Wal-Mart does not, Sears will make a $20 million economic profit. C) If Wal-Mart lowers its prices, Sears should keep its prices high. D) Both Sears and Wal-Mart would jointly be better off if they could each keep their prices high.