The Demand Curve for Corn Is Downward Sloping

question 291

Multiple Choice

The demand curve for corn is downward sloping. If the price of corn, an inferior good, falls,

• A) the income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded.
• B) the income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded.
• C) both the income and substitution effects reinforce each other to increase the quantity demanded.
• D) the income and substitution effects offset each other, but the price effect of an inferior good leads you to buy less corn.

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Definitions:

MRP

Marginal Resource Product, which measures the additional revenue generated by employing one more unit of a resource.

MRC

Marginal Revenue Cost, often used interchangeably with Marginal Cost, refers to the increase in cost associated with producing one additional unit of output.

Profitable

The condition of earning more revenue than the costs incurred, leading to a financial gain or profit for the individual or organization.

Innovation

The first commercially successful introduction of a new product, use of a new method of production, or creation of a new form of business organization.