Gasoline and Bicycles Are Substitutes in Consumption

question 66

Multiple Choice

Gasoline and bicycles are substitutes in consumption. Suppose we increase the federal gasoline tax to $1 per gallon. Initially, the gasoline price rises due to the tax, and the demand curve for bicycles shifts rightward because these goods are substitutes. Then, the bicycle price rises, and the demand curve for gasoline shifts rightward. Assuming the general equilibrium is achieved in both markets after these two steps, which of the following statements is NOT true?

• A) Partial equilibrium analysis only focuses in the first-round changes in the gasoline market (ignoring the secondary effects that arise from changes in the bicycle market).
• B) Partial equilibrium analysis would predict a larger shift in the price and quantity demanded for gasoline than a general equilibrium analysis.
• C) The price increase in gasoline is larger under the general equilibrium approach, but the change in the quantity of gasoline demanded is smaller than under partial equilibrium analysis.
• D) All of these statements are true.

Differentiate between commonly confused spellings of words.

Apply knowledge of spelling rules in identifying correctly spelled words within groups.

Enhance vocabulary through exposure to correctly and incorrectly spelled words.

Understand how to calculate and interpret conditional distributions from categorical data.

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Definitions:

Hallucinogen

A substance that causes alterations in perception, thought, and mood, leading to hallucinations or sensory distortions.

Dependence

A state in which an individual requires a particular substance or behavior to function normally and experiences physical or psychological withdrawal symptoms without it.

Tolerance

The capacity to accept or endure someone or something different from one's own beliefs, habits, or practices without interference.

Withdrawal

The act of removing oneself from a situation or substance dependence, often resulting in psychological or physiological responses due to the cessation.