Janelle spends all of her $40 income on songs from iTunes ($1 each) and applications ($4 each) for her iTouch. What is her budget equation?
A) $1 × Qsong - $5 × Qapp = Y
B) Qsong = 10 - 4 × Qapp
C) $40 + $1 × Qsong = $4 × Qapp
D) Qapp = 10 - 1/4 × Qsong
D
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When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market
a. It is appropriate to ignore that the market price includes a margin above marginal cost b. It is OK if the product on the market includes costly features your downstream division does not use c. It is OK if the product on the market is inexpensive because its quality is lower than you use d. If it is similar enough, it calls into question whether there are gains from producing it in-house
Assume the price of pizza decreases. As a result, your real income increases and you increase the quantity of pizza purchased each month. This is an example of the:
a. substitution effect. b. income effect. c. revenue effect. d. consumer price effect.