A temporary decrease in the price of oil would be considered a:
A. long-run supply shock.
B. demand shock.
C. short-run supply shock.
D. The changing price of oil would not affect any of these.
Answer: C
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Refer to Resource Supply/Demand. If the government confiscates the rent and pays the owner area D to supply Q0 units of the resource at a zero price, then
The following questions refer to the accompanying graph, which shows the supply and demand for a resource. The owner of the resource is receiving the price P0 and is providing the quantity Q0.
a. area B + C is transferred from the resource owner to the government with no loss in social gain.
b. area A + B + C overestimates the social gain that will be created.
c. demanders will continue to receive area A + B + C + D in value from the resource.
d. a deadweight loss equal to area B + C will be created.
Advertising claiming superior quality of a product makes its demand
a. More elastic b. Less elastic c. Perfectly elastic d. None of the above
Internal rate of return analysis suggest that a project should be undertaken if
A. NPV >0. B. MB > 0. C. IRR > discount rate. D. discount rate >inflation rate.
According to the substitution effect, a drop in price increases real income (purchasing power), and if the good is normal, consumers will respond by buying more of the good in question. Thus a drop in price increases quantity demanded
Indicate whether the statement is true or false