Many economists consider medical care a superior good. Which of the following statements is true regarding a superior good?
a. Consumers want more of a superior good regardless of its price.
b. When the price of a superior good increases, consumers demand more of it.
c. As consumer income increases a larger percentage of that income is spent on superior goods.
d. A superior good has an income elasticity of demand greater than one.
e. Both c and d are true of superior goods.
Question 2
Each of the following provides incentives to reduce a negative externality except:
a. merger with affected firms.
b. subsidizing consumption of the good being produced.
c. bargaining among firms.
d. taxation of the externality.
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