If the Price of Muffins, a Normal Good You Enjoy

question 152

Multiple Choice

If the price of muffins, a normal good you enjoy, rises, then

• A)the income and substitution effects offset each other but the price effect leads you to buy fewer muffins.
• B)both the income and substitution effects lead you to buy fewer muffins.
• C)the substitution effect which causes you to decrease your muffin consumption outweighs the income effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.
• D)the income effect which causes you to decrease your muffin consumption outweighs the substitution effect which causes you to increase your muffin consumption, resulting in fewer muffins purchased.

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Definitions:

Amortized

The process of gradually writing off the initial cost of an asset or loan over a period, in regular installments.

Acquisition Cost

The total cost incurred to acquire an asset, including the purchase price and any associated costs such as installation and transportation.

Goodwill

Goodwill is an intangible asset that arises when a company acquires another for a price higher than the fair value of its net identifiable assets, representing factors like brand reputation or customer relationships.

Identifiable Net Assets

The portion of a company's net assets that can be attributed to specific assets and liabilities, excluding goodwill.