The Reason That Someone Buys a Lot More Paintings When

question 148

Multiple Choice

The reason that someone buys a lot more paintings when the price of art falls is that

• A) there are many substitutes for paintings.
• B) paintings are a necessity.
• C) they complement his or her home décor.
• D) his or her income has risen.
• E) art is a luxury.

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Definitions:

Economic Profits

Profits exceeding the opportunity costs of all resources used in production, including the cost of capital.

Marginal Analysis

The examination of the benefits and costs of choosing one more or one less unit of a good or service.

Implicit Costs

The opportunity costs of using resources owned by the firm for its own production instead of selling or renting them to others.

Interest Rate

The price, calculated as a percentage of the amount borrowed, that a lender charges a borrower for the use of their savings for one year.