If the Price of Muffins, a Normal Good That You

question 195

Multiple Choice

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

• 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:

Saints

Individuals recognized for their holiness, virtue, and often miraculous deeds within many religious traditions, revered and often canonized after death.

Crooks

Persons who are dishonest or engage in illegal activities.

Time-Discounted Profits

The present value of profits expected in the future, adjusted for the time value of money.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies if other players keep theirs unchanged.