The income effect indicates that:
A) a rise in money income will cause consumers to buy smaller quantities of normal goods.
B) when the price of a product falls, the lower price will induce the consumer to buy more of that product now that it is relatively cheaper.
C) consumers should substitute among various products until the marginal utility from the last unit of each product purchased is the same.
D) when the price of a product falls, a consumer will be able to buy more of it with a specific money income.
Ans: D) when the price of a product falls, a consumer will be able to buy more of it with a specific money income.
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In Solow's exogenous growth model, the steady-state growth rate of capital can be increased by
A) higher population growth. B) higher depreciation rate. C) higher saving rate. D) higher interest rate.
In the Cournot model, a firm maximizes profit by selecting
A) its output, assuming that other firms keep their output constant. B) its price, assuming that other firms keep their price constant. C) its output, assuming that other firms will retaliate. D) its price, assuming that other firms will retaliate.