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Question

Question 1: An example of a transitory change in income is

A. the increase in income that results from a job promotion linked to your education.

B. the increase in income of California orange growers due to an orange-killing frost

in Florida.

C. the annual cost-of-living adjustment to your salary.

D. an increase in income from personal investments.

Question 2) When the income and substitution effects work in opposite directions,

A. it’s possible that the law of demand is violated.

B. the substitution effect is always positive.

C. the income effect is always positive.

D. Giffen goods aren’t possible.

Question 3) In a labor market where employers are cutting wages to control costs, from whose standpoint will the selection be “adverse”?

A. Good workers C. Employers

B. Poor workers D. Consumers

Thanks all you great Answers People!

Answer 1

Q1:

B. the increase in income of California orange growers due to an orange-killing frost in Florida.

http://www.swcollege.com/bef/mankiw/inst...

Q2

A. it’s possible that the law of demand is violated.

http://www.sbac.edu/~estesor/documents/A...

Q3

C. Employers or A. Good workers

(only bad workers may stay in company due to lower wages - thus emploers risk to have only worst workers in this case but good workers may stay abroad).

http://en.wikipedia.org/wiki/Adverse_sel...