For a given set of prices, two consumers choose bundles that are off the contract curve. In a competitive market,
A) prices will adjust until the consumers choose bundles that are on the contract curve.
B) the indifference curves will shift back to the contract curve.
C) the contract curve will shift to connect these bundles.
D) no adjustments need to be made.
A
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The effect of a change in price on the quantity bought when the consumer remains indifferent between the original and the new situation is called the
A) income effect. B) indifference effect. C) substitution effect. D) demand effect.
Assume that political business cycles do not exist. Given this assumption, we would expect, all else fixed, the output growth to be highest in which period?
A) just prior to an election B) just after an election C) in the first year of an administration D) in the second year of an administration E) none of the above