We observe that people buy less steak and more potatoes when the ...

[hubes95]

We observe that people buy less steak and more potatoes when the price of steak relative to potatoes increases. This indicates that steak and potatoes are
 
  A) substitutes.
  B) complements.
  C) inferior goods.
  D) unrelated goods.

Question 2

A possible solution to the problems of external benefits is
 
  A) to tax those receiving the extra benefits.
  B) production of the good by government.
  C) effluent fees.
  D) to restrict the amount of the good through direct government regulation.

[14vl19]

Answer to Question 1

A

Answer to Question 2

B