A true cost-of-living adjustment (COLA) in response to a change in prices would compensate consumers so that they would be able to
A) purchase the same bundle they purchased before prices changed.
B) achieve the same level of utility they did before prices changed.
C) face the same choices they did before prices changed.
D) achieve an increase in utility that is equal to the rate of inflation.
B
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Price floors in agriculture lead to
A) efficient farming techniques being employed. B) surpluses of supported farm products. C) more competition in farming. D) the most efficient market solution.
If a person supplies more hours of labor in response to a wage increase, then
A) the substitution effect is greater than the income effect. B) the income effect is greater than the substitution effect. C) the income effect equals the substitution effect. D) the person is not maximizing utility.