The price of ________ consumption in terms of ________ consumption is ________
A) future; current; 1/(1 + r)
B) present; future; 1/(1 + r)
C) future; current; r
D) present; future; r
E) future; current; 1 + r
A
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The fact the consumers substitute one good for another when prices change is
A) taken into account by the fixed market basket used in calculating the CPI. B) not taken into account by the fixed market basket used in calculating the CPI. C) not important to economists. D) a reason why the CPI is used to calculate inflation rates. E) a reason why the CPI understates the actual change in the cost of living.
Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12. Which of the following will happen?
A) The firm will sell more output than its competitors. B) The firm will not sell any output. C) The firm's revenue will increase. D) The firm's profits will increase.