Answer all questions. Explain all steps. No assumptions.

2. (10 points) Indicate whether the following statements are TRUE or FALSE and explain your answer fully, but succinctly. Without an adequate explanation, you will get no credit. a) A decrease in the income tax will make people work more. b) Dr. Strangelove has gured out how to clone consumers. His rst effort was done on the population of Walla, WA. Each original citizen got a clone with exactly the same income and preferences. This doubled the own-price elasticity of demand for cookies in Walla