If aggregate demand and aggregate supply both shift left, we can be sure that the price level is higher in the short run.

Marge buys 5 CDs and 7 DVDs. The marginal utility of the 5th CD and the marginal utility of the 7th DVD are both equal to 30 utils. Can we say that this is the optimal combination of CDs and DVDs for Marge?

A) No. We need to know her preferences for CDs and DVDs. B) No. For this to be the optimal combination, the total utility from her purchase of CDs needs to equal the total utility from her purchase of DVDs. C) No. If this was the optimal combination, the marginal utility per dollar of the 5th CD and the 7th DVD would be equal. D) Yes.

The price of milk increases. Which of the following is NOT part of the likely chain of events that follows from this price change?

A) Some milk consumers reduce their consumption of milk. B) Milk producers increase their production of milk. C) The producers of feed for dairy cows increase production. D) The manufacturers of milking machines lay off some workers.