Rice consumption per capita in China is falling while income per capita is rising, other things being equal. This means that
A. rice demand is price inelastic.
B. rice has many substitutes.
C. rice is an inferior good.
D. None of the above.
Ans: C. rice is an inferior good.
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When the economy is disturbed by a change in the output market
A) a fixed exchange rate has an advantage over a flexible rate. B) a floating exchange rate has an advantage over a fixed rate. C) a crawling peg exchange rate has an advantage over a flexible rate. D) a floating exchange rate has the same effect as fixed rate. E) a flexible exchange rate is not as effective as a fixed exchange rate.
Product differentiation
A) is possibly welfare enhancing if new products match consumer preferences better. B) is welfare reducing even if new products match consumer preferences better. C) is welfare enhancing even if new products do not match consumer preferences better. D) is welfare reducing even if new products do not match consumer preferences better.