PROBLEM SET – OVWL 2023

1. Which of the following is a decision that economists study?

a. how much people work
b. what people buy
c. how much money people save
d. All of the above are correct.

2. When society requires that firms reduce pollution, there is

a. a tradeoff because of reduced incomes to the firms' owners and workers.
b. a tradeoff only if some firms are forced to close.
c. no tradeoff, since the cost of reducing pollution falls only on the firms affected by the
requirements.
d. no tradeoff, since everyone benefits from reduced pollution.

3. Which of the following statements about trade is false?

a. Trade increases competition.
b. With trade, one country wins and one country loses.
c. Bulgaria can benefit, potentially, from trade with any other country.
d. Trade allows people to buy a greater variety of goods and services at lower cost.

4. Productivity is defined as the

a. amount of goods and services produced from each unit of labor input.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor that can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.

5. Which of the following is not correct?

a. Economists use some familiar words in specialized ways.
b. Economics has its own language and its own way of thinking, but few other fields of
study do.
c. Supply, demand, elasticity, comparative advantage, consumer surplus, and deadweight
loss are all terms that are part of the economist’s language.
d. The value of the economist’s language lies in its ability to provide you with a new and
useful way of thinking about the world in which you live.

6. With respect to how economists study the economy, which of the following statements is most
accurate?
a. Economists study the past, but they do not try to predict the future.
b. Economists use “rules of thumb” to predict the future.
c. Economists devise theories, collect data, and analyze the data to test the theories.
d. Economists use controlled experiments in much the same way that biologists and
physicists do.

7. One way to characterize the difference between positive statements and normative statements is as
follows:
a. Positive statements tend to reflect optimism about the economy and its future, whereas
normative statements tend to reflect pessimism about the economy and its future.
b. Positive statements offer descriptions of the way things are, whereas normative
statements offer opinions on how things ought to be.
c. Positive statements involve advice on policy matters, whereas normative statements
are supported by scientific theory and observation.
 d. Economists outside of government tend to make normative statements, whereas
government-employed economists tend to make positive statements.

8. When an economist points out that you and millions of other people are interdependent, he or she
is referring to the fact that we all
a. rely upon the government to provide us with the basic necessities of life.
b. rely upon one another for the goods and services we consume.
c. have similar tastes and abilities.
d. are concerned about one another’s well-being.

9. When can two countries gain from trading two goods?

a. when the first country can only produce the first good and the second country can only
produce the second good
b. when the first country can produce both goods, but can only produce the second good at
great cost, and the second country can produce both goods, but can only produce the first good at
great cost
c. when the first country is better at producing both goods and the second country is
worse at producing both goods
d. Two countries could gain from trading two goods under all of the above conditions.

Assume that Japan and Korea can switch between producing cars and producing airplanes at a
constant rate.
 Hours Needed to Make 1 Quantity Produced in 2400 Hours
Car Airplane Cars Airplanes
Japan 30 150 80 16
Korea 50 150 48 16

10. Japan’s opportunity cost of one airplane is

a. 1/5 car and Korea’s opportunity cost of one airplane is 1/3 car.
b. 1/5 car and Korea’s opportunity cost of one airplane is 3 cars.
c. 5 cars and Korea’s opportunity cost of one airplane is 1/3 car.
d. 5 cars and Korea’s opportunity cost of one airplane is 3 cars.

11. Japan has an absolute advantage in the production of

a. cars and a comparative advantage in the production of cars.
b. cars and a comparative advantage in the production of airplanes.
c. neither good and a comparative advantage in the production of cars.
d. neither good and a comparative advantage in the production of airplanes.

12. Trade between countries

a. allows each country to consume at a point outside its production possibilities frontier.
b. limits a country’s ability to produce goods and services on its own.
c. must benefit both countries equally; otherwise, trade is not mutually beneficial.
d. can best be understood by examining the countries’ absolute advantages.

13. In a market economy,

a. supply determines demand and demand, in turn, determines prices.
b. demand determines supply and supply, in turn, determines prices.
c. the allocation of scarce resources determines prices and prices, in turn, determine
supply and demand.
d. supply and demand determine prices and prices, in turn, allocate the economy’s scarce
resources.
14. In a competitive market, the price of a product
a. is determined by buyers, and the quantity of the product produced is determined by
sellers.
b. is determined by sellers, and the quantity of the product produced is determined by
buyers.
c. and the quantity of the product produced are both determined by sellers.
d. None of the above is correct.

15. An increase in quantity demanded

a. results in a movement downward and to the right along a demand curve.
b. results in a movement upward and to the left along a demand curve.
c. shifts the demand curve to the left.
d. shifts the demand curve to the right.

16. A decrease in the price of a good will

a. increase supply.
b. decrease supply.
c. increase quantity supplied.
d. decrease quantity supplied.

17. Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at
a. prices at and above the equilibrium price.
b. prices at and below the equilibrium price.
c. prices above and below the equilibrium price, but not at the equilibrium price.
d. the equilibrium price but not above or below the equilibrium price.

The demand schedule below pertains to sandwiches demanded per week.

Harry’s Darby’s Jake’s
Price Quantity Quantity Quantity
Demanded Demanded Demanded
$3 3 4 3
$5 1 2 x

18. Suppose x = 1. Then the slope of the market demand curve is

a. -3.
b. -1/3.
c. 1/3.
d. 3.

19. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the
following:
• x = 2.
• The current price of a sandwich is $5.00.
• The market quantity supplied of sandwiches is 10.
• The law of supply applies to the supply of sandwiches.
Then there is a
a. shortage of 5 sandwiches, and the price would be expected to rise from its current level
of $5.00.
b. shortage of 5 sandwiches, and the price would be expected to fall from its current level
of $5.00.
c. surplus of 5 sandwiches, and the price would be expected to rise from its current level
of $5.00.
 d. surplus of 5 sandwiches, and the price would be expected to fall from its current level of
$5.00.

20. There is no shortage of scarce resources in a market economy because

a. the government makes shortages illegal.
b. resources are abundant in market economies.
c. prices adjust to eliminate shortages.
d. quantity supplied is always greater than quantity demanded in market economies.

21. In general, elasticity is a measure of

a. the extent to which advances in technology are adopted by producers.
b. the extent to which a market is competitive.
c. how firms’ profits respond to changes in market prices.
d. how much buyers and sellers respond to changes in market conditions.

22. How does the concept of elasticity allow us to improve upon our understanding of supply and
demand?
a. Elasticity allows us to analyze supply and demand with greater precision than would be
the case in the absence of the elasticity concept.
b. Elasticity provides us with a better rationale for statements such as “an increase in x
will lead to a decrease in y” than we would have in the absence of the elasticity concept.
c. Without elasticity, we would not be able to address the direction in which price is likely
to move in response to a surplus or a shortage.
d. Without elasticity, it is very difficult to assess the degree of competition within a
market.

23. If the price elasticity of demand for a good is 0.4, then which of the following events is consistent
with a 2 percent decrease in the quantity of the good demanded?
a. a 0.8 percent increase in the price of the good
b. a 2.4 percent increase in the price of the good
c. a 5 percent increase in the price of the good
d. a 8 percent increase in the price of the good

24. Suppose that two supply curves pass through the same point. One is steep, and the other is flat.
Which of the following statements is correct?
a. The flatter supply curve represents a supply that is inelastic relative to the supply
represented by the steeper supply curve.
b. The steeper supply curve represents a supply that is inelastic relative to the supply
represented by the flatter supply curve.
c. Given two prices with which to calculate the price elasticity of supply, that elasticity
would be the same for both curves.
d. A decrease in demand will increase total revenue if the steeper supply curve is relevant,
while a decrease in demand will decrease total revenue if the flatter supply cure is relevant.

25. Which of the following was not a reason OPEC failed to keep the price of oil high?
a. Over the long run, producers of oil outside of OPEC responded to higher prices by
increasing oil exploration and by building new extraction capacity.
b. Consumers responded to higher prices with greater conservation.
c. Consumers replaced old inefficient cars with newer efficient ones.
d. The agreement OPEC members signed allowed each country to produce as much oil as
each wanted.

26. Policymakers use taxes

 a. to raise revenue for public purposes but not to influence market outcomes.
b. both to raise revenue for public purposes and to influence market outcomes.
c. when they realize that price controls alone are insufficient to correct market inequities.
d. only in those markets in which the burden of the tax falls clearly on the sellers.

27. If the government removes a binding price ceiling from a market, then the price paid by buyers
will
a. increase, and the quantity sold in the market will increase.
b. increase, and the quantity sold in the market will decrease.
c. decrease, and the quantity sold in the market will increase.
d. decrease, and the quantity sold in the market will decrease.

28. If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of
cars would
a. decrease by less than $500.
b. decrease by exactly $500.
c. decrease by more than $500.
d. increase by an indeterminate amount.

29. Welfare economics is the study of

a. the well-being of less fortunate people.
b. welfare programs in the United States.
c. how the allocation of resources affects economic well-being.
d. the effect of income redistribution on work effort.

Buyer Willingness To Pay

Calvin $150.00
Sam $135.00
Andrew $120.00
Lori $100.00

30. If the price of the product is $122, then the total consumer surplus is
a. $28.
b. $41.
c. $43.
d. $405.

31. If the market price is $105,

a. Calvin’s consumer surplus is $45 and total consumer surplus is $85.
b. Sam’s consumer surplus is $30 and total consumer surplus is $90.
c. Andrew’s consumer surplus is $15 and total consumer surplus is $67.50.
d. Lori’s consumer surplus is -$2 and total consumer surplus is $100.

32. Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn is $15, the cost
of mowing the second lawn is $25, and the cost of mowing the third lawn is $40. His producer surplus
on the first three lawns of the day is $100. If Ronnie charges all customers the same price for lawn
mowing, that price is
a. $20.
b. $60.
c. $80.
d. $180.
33. Total surplus is represented by the area
a. under the demand curve and above the price.
b. above the supply curve and up to the price.
c. under the supply curve and up to the price.
d. between the demand and supply curves up to the point of equilibrium.

34. Externalities are

a. side effects passed on to a party other than the buyers and sellers in the market.
b. side effects of government intervention in markets.
c. external forces that cause the price of a good to be higher than it otherwise would be.
d. external forces that help establish equilibrium price.

35. Which of the following tools help us evaluate how taxes affect economic well-being?
(i) consumer surplus
(ii) producer surplus
(iii) tax revenue
(iv) deadweight loss
a. (i) and (ii) only
b. (i), (ii), and (iii) only
c. (iii) and (iv) only
d. (i), (ii), (iii), and (iv)

36. When a tax is imposed on the sellers of a good, the

a. demand curve shifts downward by less than the amount of
the tax.
b. demand curve shifts downward by the amount of the tax.
c. supply curve shifts upward by less than the amount of the tax.
d. supply curve shifts upward by the amount of the tax.

Market Characteristic
A Demand is very elastic.
B Demand is very inelastic.
C Supply is very elastic.
D Supply is very inelastic.

37. Suppose the government is considering levying a tax in one or more of the markets described in
the table. Which of the markets will allow the government to minimize the deadweight loss(es) from
the tax?
a. market A only
b. markets A and C only
c. markets B and D only
d. market C only

The vertical distance between points A and B represents the original tax.
38. If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers
would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would
be 1.5 units. Compared to the original tax rate, this lower tax rate would
a. increase government revenue and increase the deadweight loss from the tax.
b. increase government revenue and decrease the deadweight loss from the tax.
c. decrease government revenue and increase the deadweight loss from the tax.
d. decrease government revenue and decrease the deadweight loss from the tax.

Chelsea wants to start her own Christmas ornament business. She can purchase a suitable factory that
costs $100,000. Chelsea currently has $150,000 in the bank earning 3 percent interest per year.

39. Suppose Chelsea purchases the factory using her own money. What is Chelsea’s annual implicit
opportunity cost of purchasing the factory?
a. $2,000
b. $3,000
c. $4,500
d. $5,000

40. Suppose Chelsea purchases the factory using $50,000 of her own money and $50,000 borrowed
from a bank at an interest rate of 6 percent. What is Chelsea’s annual opportunity cost of purchasing
the factory?
a. $2,000
b. $3,000
c. $4,500
d. $5,000

41. Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of
output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q =
130). Then the marginal product of the 13th worker is
a. 8 units of output.
b. 10 units of output.
c. 122 units of output.
d. 132 units of output.

42. At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of
producing the twenty-first pair of boots is $83. We can conclude that the
a. average variable cost of 21 pairs of boots is $23.
b. average total cost of 21 pairs of boots is $23.
 c. average total cost of 21 pairs of boots is $15.09.
d. marginal cost of the 20th pair of boots is $20.

43. Brady Industries has average variable costs of $1 and average total costs of $3 when it produces
500 units of output. The firm's total fixed costs equal
a. $2.
b. $4.
c. $1,000.
d. $2,000.

44. In the long run a company that produces and sells candy bars incurs total costs of $1,200 when
output is 2,400 candy bars and $1,400 when output is 2,900 candy bars. The candy bar company
exhibits
a. diseconomies of scale because total cost is rising as output rises.
b. diseconomies of scale because average total cost is rising as output rises.
c. economies of scale because total cost is rising as output rises.
d. economies of scale because average total cost is falling as output rises.

45. If your local gasoline station raised its price by 20 percent, its sales of gasoline would decrease
substantially because your local gas station
a. has little or no market power.
b. is small relative to the size of the gasoline market.
c. is a competitive firm.
d. All of the above are correct.

46. Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in
total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the
200th unit will be
a. less than $12.
b. more than $12.
c. $12.
d. Any of the above may be correct depending on the price elasticity of demand for the
product.

47. Suppose that a firm operating in perfectly competitive market sells 100 units of output. Its total
revenues from the sale are $500. Which of the following statements is correct?
(i) Marginal revenue equals $5.
(ii) Average revenue equals $5.
(iii) Price equals $5.
a. (i) only
b. (iii) only
c. (i) and (ii) only
d. (i), (ii), and (iii)

48. Laura is a gourmet chef who runs a small catering business in a competitive industry. Laura
specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total
revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits,
Laura should
a. make more than 20 wedding cakes per month.
b. make fewer than 20 wedding cakes per month.
c. continue to make 20 wedding cakes per month.
d. We do not have enough information to answer the question.
Suppose that a firm in a competitive market faces the following revenues and costs:
Marginal Marginal
Quantity Cost Revenue
12 $5 $7.50
13 $6 $7.50
14 $7 $7.50
15 $8 $7.50
16 $9 $7.50
17 $10 $7.50

49. If the firm is currently producing 14 units, what would you advise the owners?
a. decrease quantity to 13 units
b. increase quantity to 15 units
c. continue to operate at 14 units
d. increase quantity to 16 units
In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive market, and

panel (b) depicts the linear market supply curve for a market with a fixed number of identical firms.

50. If there are 300 identical firms in this market, what level of output will be supplied to the market
when price is $1.00?
a. 300
b. 6,000
c. 30,000
d. 60,000

51. A perfectly competitive firm produces where

a. marginal cost equals price, while a monopolist produces where price exceeds marginal
cost.
b. marginal cost equals price, while a monopolist produces where marginal cost exceeds
price.
c. price exceeds marginal cost, while a monopolist produces where marginal cost equals
price.
d. marginal cost exceeds price, while a monopolist produces where marginal cost equals
price.
52. Which of the following are necessary characteristics of a monopoly?
(i) The firm is the sole seller of its product.
(ii) The firm's product does not have close substitutes.
(iii) The firm generates a large economic profit.
(iv) The firm is located in a small geographic market.
a. (i) and (ii) only
b. (i) and (iii) only
c. (i), (ii), and (iii) only
d. (i), (ii), (iii), and (iv)

53. Which of the following statements is (are) true of a monopoly?

(i) A monopoly has the ability to set the price of its product at whatever level it desires.
(ii) A monopoly's total revenue will always increase when it increases the price of its product.
(iii) The more a monopoly increases output, the higher the profits.
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (ii) and (iii) only

54. A monopolist produces

a. more than the socially efficient quantity of output but at a higher price than in a
competitive market.
b. less than the socially efficient quantity of output but at a higher price than in a
competitive market.
c. the socially efficient quantity of output but at a higher price than in a competitive
market.
d. possibly more or possibly less than the socially efficient quantity of output, but
definitely at a higher price than in a competitive market.

55. Price discrimination

a. forces monopolies to charge a lower price as a result of government regulation.
b. is an attempt by a monopoly to prevent some customers from purchasing its product by
charging a high price.
c. is an attempt by a monopoly to increases its profit by selling the same good to different
customers at different prices.
d. increases the consumer surplus associated with a monopolistic market.

56. Which of the following statements is not correct?

a. The government may use antitrust laws to prevent a merger if the government believes
the merger will reduce competition and increase prices.
b. By regulating a natural monopoly where price equals average total cost, the monopoly
earns zero profits.
c. An advantage of private ownership over public ownership is that private business
owners tend to fire inefficient managers.
d. The government should always intervene to improve monopoly inefficiency.

57. An oligopoly is a market in which

a. there are only a few sellers, each offering a product similar or identical to the products
offered by other firms in the market.
b. firms are price takers.
c. the actions of one seller in the market have no impact on the other sellers' profits.
d. there are many price-taking firms, each offering a product similar or identical to the
products offered by other firms in the market.
58. A monopolistically competitive industry is characterized by
a. many firms, differentiated products, and barriers to
entry.
b. many firms, differentiated products, and free entry.
c. a few firms, identical products, and free entry.
d. a few firms, differentiated products, and barriers to
entry.

59. For a monopolistically competitive firm,

a. marginal revenue and price are the same.
b. average revenue and price are the same.
c. at the profit-maximizing quantity of output, price equals marginal cost.
d. at the profit-maximizing quantity of output, price equals the minimum of average
total cost.

60. In which of the following product markets are we likely to observe the largest amount of
advertising?
a. markets with highly differentiated products
b. perfectly competitive markets
c. markets in which industrial products are sold
d. markets in which there is very little difference between different firms' products

61. Which of the following examples illustrates an oligopoly market?

a. a farmers’ market with many individuals selling sweet corn and tomatoes
b. a city whose electrical service is provided by one electric co-operative
c. a city with two firms who are licensed to sell school uniforms for the local schools
d. a city with many independently-owned hair styling salons

62. Which of the following statements is correct?

a. If duopolists successfully collude, then their combined output will be equal to the output
that would be observed if the market were a monopoly.
b. Although the logic of self-interest decreases a duopoly’s price below the monopoly
price, it does not push the duopolists to reach the competitive price.
c. Although the logic of self-interest increases a duopoly’s level of output above the
monopoly level, it does not push the duopolists to reach the competitive level.
d. All of the above are correct.

63. In a duopoly situation, the logic of self-interest results in a total output level that
a. equals the output level that would prevail in a competitive market.
b. equals the output level that would prevail in a monopoly.
c. exceeds the monopoly level of output, but falls short of the competitive level of output.
d. falls short of the monopoly level of output.

64. When strategic interactions are important to pricing and production decisions, a typical firm will
a. set the price of its product equal to marginal cost.
b. consider how competing firms might respond to its actions.
c. generally operate as if it is a monopolist.
d. consider exiting the market.

65. Which of the following statements is true?

 a. The proper scope of antitrust laws is well defined and definite.
b. Antitrust laws focus on granting certain firms the option to form a cartel.
c. Policymakers have the difficult task of determining whether some firms' decisions have
legitimate purposes even though they appear anti-competitive.
d. There is always a need for policymakers to try to limit a firm's pricing power, regardless of
whether the firm's market is competitive, a monopoly, or an oligopoly.

66. The story of the prisoners’ dilemma shows why

a. predatory pricing is clearly not in society’s best interest.
b. economists are unanimous in condemning resale price maintenance, since it inevitably
reduces competition.
c. oligopolies can fail to act independently, even when independent decision-making is in
their best interest.
d. oligopolies can fail to cooperate, even when cooperation is in their best interest.

67. Suppose that a college professor is creating an exam in her university office. Which of the
following would be an example of a factor of production used by the professor?
(i) the professor’s time
(ii) a computer software program into which the professor types the exam questions
(iii) the physical space of the professors office where she works when creating the exam
(iv) the interest on the professor’s home mortgage
a. (i) only
b. (i) and (ii) only
c. (i), (ii), and (iii) only
d. (i), (ii), (iii), and (iv)

68. The marginal product of labor is the

a. marginal revenue product minus the wage paid to the worker.
b. total amount of output divided by the total units of labor.
c. increase in the amount of output from an additional unit of labor.
d. None of the above is correct.

69. Roxanne's hourly wage increases from $9 to $13. Which of the following describes a consequence
of the increase in Roxanne's wage?
a. The opportunity cost of Roxanne's leisure time has increased.
b. Roxanne may choose to work fewer hours due to the increase in her wage.
c. If Roxanne’s labor supply curve is upward sloping, she will choose to work fewer hours.
d. Both a and b are correct.

70. Which of the following would be an example of capital for a computer software firm?
(i) the firm's computer programmers
(ii) the wages the firm pays to its computer programmers
(iii) computer equipment
a. (i) only
b. (ii) only
c. (iii) only
d. (i) and (iii) only

71. As a result of a fire, a small business owner loses some of her computers and other equipment. If
the property of diminishing returns applies to all factors of production, she should expect to see
a. an increase in the marginal productivity of her remaining capital and an increase in the
marginal productivity of her labor.
 b. an increase in the marginal productivity of her remaining capital and a decrease in the marginal
productivity of her labor.
c. a decrease in the marginal productivity of her remaining capital and an increase in the marginal
productivity of her labor.
d. a decrease in the marginal productivity of her remaining capital and a decrease in the marginal
productivity of her labor.

72. Wages of doctors tend to be higher than wages of bankers. Which of the following is a
compensating differential explaining the difference in wages?
a. Doctors have the stress of being responsible for other peoples’ lives while bankers do
not.
b. Doctors are on call to work nights and weekends, while bankers work traditional
business hours.
c. Doctors must pay for malpractice insurance in case they are sued for a mistake on the
job.
d. All of the above are compensating differentials.

73. Labor-market discrimination is evident when

a. wages of individuals differ on the basis of some recognizable attribute that is unrelated
to productivity.
b. wage rates differ for similar jobs.
c. consumers prefer to shop at some stores, and not at others.
d. wages reflect workers’ human capital.

74. When the government enacts policies to redistribute income,

a. the objective is to enhance efficiency and a side effect is that the allocation of resources
becomes more equal.
b. the objective is to enhance efficiency and a side effect is that the allocation of resources
becomes less equal.
c. the objective is to enhance equality and a side effect is that the allocation of resources
becomes more efficient.
d. the objective is to enhance equality and a side effect is that the allocation of resources
becomes less efficient.

75. Which of the following is consistent with the data reported in the figure?
a. The female poverty rate is higher for all age groups than the male poverty rate.
b. The disparity between male and female poverty increases with age.
c. Neither a nor b are correct.
 d. Both a and b are correct.

76. When the government taxes income as part of a redistribution program,

a. the poor pay higher taxes.
b. the rich always benefit more than the poor.
c. the poor are encouraged to work.
d. incentives to earn income are diminished.

77. Which of the following statements is not true?

a. When consumers purchase more of one good, they are giving up the ability to buy as
much of other goods.
b. When consumers choose to take more leisure time, they are giving up the ability to
consume as much as before.
c. Consumers face consumption tradeoffs because they have limited income.
d. Consumers face consumption tradeoffs because they have limited preferences for
goods.

78. If the consumer’s income is $140, then what is the price of a CD?
a. $3
b. $5
c. $7
d. $9

79. A consumer who chooses to spend all of her income could be at which point(s) on the figure?
a. A only
b. E only
c. B, C, or D only
d. A, B, C, or D only
80. It would be possible for the consumer to reach I2 if
a. the price of Y decreases.
b. the price of X decreases.
c. income increases.
d. All of the above would be correct.