Author Question: For an inferior good, the income and substitution effects A) work together. B) work against ... (Read 82 times)

Jipu 123 · **on:** Jul 1, 2018

For an inferior good, the income and substitution effects

A) work together.
B) work against each other.
C) can work together or in opposition to each other depending upon their relative magnitudes.
D) always exactly cancel each other.

Question 2

A plastics factory emits water pollutants into a nearby river.

The marginal private cost of producing plastics is constant, the marginal external cost of the pollutants increases with the quantity of plasticis, and the demand for plastics is downward sloping. What happens to the socially optimal level of output and market price if the marginal external cost curve shifts upward? A) Optimal price and quantity decrease
B) Optimal price increases, optimal quantity remains unchanged
C) Optimal price increases, optimal quantity decreases
D) Optimal price and quantity decline