During October and November 2008, gasoline prices were falling dramatically, making travel by car less expensive but air travel prices were as high as ever. What is TRUE about consumer preferences, possibilities, or choices?
A) The relative price of air travel in terms of travelling by car decreases.
B) If travelling by car is a normal good, both the substitution and income effects would lead to a decrease in travelling by car.
C) The consumers' budget line would shift outward and its slope would not change.
D) If air travel is a normal good, both the substitution and income effects would lead to an increase in air travel.
A
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Suppose that opportunity costs are constant in both France and Germany. In France, maximum feasible hourly production levels are either 3 units of wheat or 5 units of wine. In Germany, maximum feasible hourly production levels are either 4 units of wheat
or 10 units of wine. It is correct to state that A) Germany has an comparative advantage in producing both wheat and wine. B) Germany has a comparative advantage in producing wine. C) France has a comparative advantage in producing both wheat and wine. D) France has a comparative advantage in producing wine.
Which of the following is most likely to reduce the supply of labor?
A. An increase in population B. A decrease in labor productivity C. An increase in the value placed on leisure by workers D. A decrease in the value placed on leisure by workers