Assume That an Inferior Good Is Produced in a Perfectly

question 18

Multiple Choice

Assume that an inferior good is produced in a perfectly competitive,increasing-cost industry with external diseconomies.The market is initially in long-run equilibrium.After all long-run adjustments are made,which of the following would occur in this market as a result of an increase in consumers' incomes?

• A)The market price would remain unchanged;the market quantity would rise.
• B)The market price would rise;the market quantity would fall.
• C)The market price would remain unchanged;the market quantity would fall.
• D)Both the market price and the market quantity would fall.
• E)Both the market price and the market quantity would rise.

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Definitions:

Elects

The act of choosing or deciding on a particular option or course of action, often used in legal and financial contexts.

Terminate

To bring to an end; this can relate to employment, contracts, or services, among others.

Corporate Alternative Minimum Tax

A parallel tax system aimed at ensuring that corporations pay at least a minimum amount of tax, regardless of deductions or credits that would otherwise lower their tax bill.

Exemption Amount

This refers to a specific dollar amount that taxpayers can claim for themselves and their dependents to reduce taxable income.