Suppose the market for potatoes can be expressed as follows:
Supply: QS = -20 + 10p
Demand: QD = 400 - 20p
If the government sets a maximum price of $10 per unit, what will be the quantity demanded and quantity supplied?
With a maximum price of $10, suppliers will sell only 80 units. (Q = -20 + 10(10 ) = 80 ). But at a price of $10, buyers wish to purchase 200 units: Q = 400 - 20(10 ) = 200. Thus, there will be excess demand of 120 units.
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If adverse selection exists in a market
A) the government steps in and shuts it down. B) the market is considered a "grey market." C) consumers may not participate in the market at all. D) total surplus is maximized.
Are markets always in equilibrium?
a. Yes, they are always at the equilibrium point, or very close to it. b. Yes, because few things tend to alter supply and demand. c. No, but if there is no interference, they tend to move toward equilibrium. d. No, they never "settle down" into a stable price and quantity. e. Uncertain, economic theory has no answer to this question.
Refer to the cost data given below. How much is the firm's total fixed costs?
A. $900
B. $500
C. $400
D. Cannot be determined from the given data
One In the News article is titled "The Cola Wars: It's Not All Taste." Firms in a monopolistically competitive industry, such as the soft drink market, are likely to advertise in an attempt to
A. Allocate resources more efficiently. B. Decrease the price elasticity of demand. C. Increase the cross-price elasticity of demand D. Reduce market power.