"Gasoline purchases were up 10% last week, even though gasoline prices were 6 cents higher than the week before! You see, the law of demand does not hold for gasoline!" What is being misunderstood in the above statement?
A) Nothing at all.
B) It implies the demand curve for gasoline is vertical.
C) It fails to recognize that the demand curve has shifted to the right.
D) It fails to hold constant all the other factors that influence demand.
C
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When comparing partial equilibrium effects to general equilibrium effects one can conclude that
A) general equilibrium effects are always larger. B) partial equilibrium effects are always larger. C) the effects are of equal size. D) one cannot determine before the fact which effect is greater.
The opportunity cost of an activity means the:
a. amount of money the activity costs. b. number of hours that is required to engage in this activity. c. expected gains by engaging in the activity. d. amount of other things that must be sacrificed in order to engage in the activity. e. expected gains minus the expected costs of engaging in the activity.