1. If income increases, then the

A. Budget line rotates counter-clockwise

B. Budget line rotates clockwise

C. Budget line shifts to the right

D. Opportunity set contracts

2. A decrease in the price of good Y will have what effect on the budget line on a normal X-Y graph?

A. Increase the vertical intercept

B. Decrease the horizontal intercept

C. Parallel outward shift of the line

D. Parallel inward shift of the line

3. What are the advantages to a firm of selling gift certificates?

A. Greater quantity sold if your good is a normal good

B. Greater quantity if your good is an inferior good

C. Reduced strain on the refund department and greater quantity sold if your good is a normal good

D. Reduced strain on the refund department and greater quantity if your good is an inferior good

4. Suppose that consumers' preferences are well behaved in that properties 4-1-4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y increases. Then, which of the following effect is known with certainty.

A. The income and substitution effect reinforce one another leading to an overall increase the consumption of good X

B. The income and substitution effect reinforce one another leading to an overall decrease the consumption of good X

C. There will be an indeterminate effect on the consumption of good X

D. The income and substitution effect will reinforce one another leading to an overall increase in the consumption of good Y