12. Candice currently spends $200 per month on long distance telephone calls. If the telephone company decides to reduce the rate from 10 cents a minute to 5 cents a minute then:

1. whether she spends more or less than $200 per month depends on whether long distance telephone calls are a normal good or an inferior good.
2. the fact that demand curves are downward-sloping implies she will spend more than $200 per month on long distance telephone calls.
3. she will spend less than $200 per month on long distance telephone calls because the new price is an effective price floor.
4. whether she spends more or less than $200 per month on long distance telephone calls depends on whether her demand is elastic or inelastic.
5. she will spend more than $200 per month on long distance telephone calls because her demand shifted out.

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