For the "Composite Commodity Theorem" to hold, all goods in the composite must:
a. have constant prices.
b. have constant relative prices.
c. be used in fixed proportions.
d. be net complements.
b
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A monopolistically competitive firm chooses
A) the price of the product it sells but market forces determine the quantity it will be able to sell. B) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry. C) both the quantity of output to produce and the price at which it will sell its output. D) the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry.
When a good is normal:
A. an increase in income raises consumption at each price, so the demand curve shifts to the left. B. an increase in income raises consumption at each price, so the demand curve shifts to the right. C. a decrease in income lowers consumption at each price, so the demand curve shifts to the right. D. an increase in income lowers consumption at each price, so the demand curve shifts to the left.