Suppose that Katie and Kelly each expect to receive $500 worth of marginal benefits from a proposed new recreation center, whereas Kerry expects to receive only $100 worth. If the proposed tax levied on each for the center would be $300, a majority vote will

Multiple Choice

pass this project and resources will be overallocated to it.

pass this project and resources will be underallocated to it.

defeat this project and resources will be underallocated to it.

pass this project and resources will be efficiently allocated to it.

The income elasticity of demand for food is roughly 1. Suppose a consumer's monthly income is $5,000, of which 10 percent is spent on food. If the income of this consumer doubles, the amount she'll spend on food will be

Multiple Choice

$500 per month.

$750 per month.

$1,000 per month.

$1,100 per month.

A 4 percent increase in the price of tea causes 10 percent increase in the demand for coffee. The cross elasticity of demand for coffee with respect to the price of tea is

Multiple Choice

-0.4.

0.4.

-2.5.

2.5.