Which of the following statements is FALSE?
A. An increase in income causes the demand curve for an inferior good to shift to the right.
B. An increase in income causes an increase in the demand for a normal good.
C. An increase in income causes a decrease in the demand for an inferior good.
D. A decrease in income causes the demand curve for a normal good to shift to the left.
A. An increase in income causes the demand curve for an inferior good to shift to the right. (When income increases, the demand curve shifts to the left.)
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Externalities can be positive or negative. An example of a positive externality is the third-party benefits from solar energy production such as reduced emissions, cleaner air, and the "warm glow" some people experience from engaging in sustainable activities. An example of a negative externality is the emissions produced from driving gasoline powered motor vehicles such. These emissions have been shown to adversely effect the environment, agriculture, and human productivity, morbidity, and mortality. Which of the following policies would NOT incentivize consumers or producers to internalize external costs of the activities they engage in?
a. Driving subsidies to automobile drivers. b. Production subsidies to manufacturers of solar energy equipment such as photovoltaic cells and batteries. c. Driving taxes to automobile drivers. d. Consumption subsidies to buyers of solar energy equipment such as photovoltaic cells and batteries. e. None of the above.
Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?
A. If product demand was price-elastic B. If marginal revenue is positive C. If marginal revenue was greater than marginal cost D. If marginal cost was greater than marginal revenue