Which of the following is an example of an application of the ceteris paribus assumption?
A) an analysis of how price changes affect how much of a good people will purchase when all other factors are held constant
B) an analysis of how people purchase more goods when prices decline and income increases
C) After reading an article on the dangers of high-fat diets, an individual buys less red meat when prices increase.
D) an analysis of how worker productivity increases when a firm invests in new machines and training programs
Answer: A
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To support the argument for an active role for government in stabilizing the economy, it must be true that
A) consumers are not rational and that not all wages and prices are flexible. B) not all wages and prices are flexible and that government must be able to react quickly enough. C) government must be able to react quickly enough and that shocks to the economy be primarily due to aggregate supply shocks. D) shocks to the economy be primarily due to aggregate supply shocks and that consumers are not rational.
In the game in Scenario 13.3, the equilibrium outcome:
A) is for Moto to offer a CD changer and Zport to offer low-profile tires. B) is for Moto to offer a CD changer and Zport to offer a sun roof. C) is for Moto to offer free maintenance and Zport to offer low-profile tires. D) is for Moto to offer free maintenance and Zport to offer a sunroof. E) does not exist in pure strategies.