Betsy Graduates from College,where She Earned $3,000 a Year Working

question 2

Multiple Choice

Betsy graduates from college,where she earned $3,000 a year working part-time,and takes a job as a third grade teacher,where she now earns $30,000 per year.About the same time she received her first paycheck,her bicycle was stolen.With her old income she would have purchased a new bike but with her new income she purchased a new car.Therefore,

• A) bicycles are a normal good for Betsy
• B) automobiles are an inferior good for Betsy
• C) automobiles are a normal good for Betsy
• D) Betsy's supply curve for automobiles is upward-sloping
• E) bicycles and automobiles are complementary goods for Betsy

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Definitions:

Government Subsidy

Financial assistance provided by the government to businesses, individuals, or other governmental units in support of an activity deemed beneficial to the public.

Supply

The total amount of a product or service that is available to consumers, determined by factors such as price, production costs, and market demand.

Allocative Efficiency

A state of the market where resources are allocated in a way that maximizes the net benefit to society, ensuring that every good or service is produced up to the point where the last unit provides a benefit equal to its cost of production.

Productive Efficiency

A situation where the economy or a production process is unable to produce more of one good without reducing the production of another good, using available resources in the best way.