Which of the following correctly describes the result of a price increase for an inferior good?
A) The substitution effect causes the demand for the good to decrease; the income effect causes the demand for the good to increase.
B) Both the substitution effect and the income effect cause the consumer to buy less of the good.
C) The substitution effect causes the demand for the good to increase; the income effect causes the demand for the good to decrease.
D) The substitution effect causes the consumer to buy less of the good and the income effect causes the consumer to buy more of the good.
D
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The concept of exogeneity is important because
A) it clarifies whether or not the variable is determined inside or outside your model. B) maximum likelihood estimation is no longer valid. C) under strict exogeneity, OLS may not be efficient as an estimator of dynamic causal effects. D) endogenous variables are not stationary, but exogenous variables are.
Research into new technologies
a. provides positive externalities because it creates knowledge others can use. b. results in negative externalities because government funding for research causes less government spending in other areas. c. is protected by patent laws, which eliminates the need for government intervention. d. should only be funded by the corporations that will receive the profits from the research.