People learn to hold a specific quantity of money for the groceries, theater tickets, gasoline, clothes, film, and other items they habitually purchase. This behavior is representative of the:
a. precautionary demand.
b. speculative demand.
c. transactions demand.
d. volatility demand.
e. liquidity demand.
c
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A $10 per-unit tax on cell phones raises the equilibrium price paid by consumers by $5. Before the tax, 5,000 cell phones were sold per year. The revenue from the tax is
A) zero. B) positive but less than $50,000 per year. C) $50,000 per year. D) more than $50,000 per year.
If raising taxes or borrowing are your only two choices of financing current expenditures, which would you choose, and why, if you were in charge of setting policy?
What will be an ideal response?
On August 5, 2003, a tragic fire destroyed a large Jim Beam whiskey factory in Kentucky. Assume that the U.S. market for whiskey is perfectly competitive, and that the market was originally in long run equilibrium. What would be the effects of such an incident?
a. An increase in supply would cause a reduction in price, which would then lead to entry of firms. b. A decrease in supply would cause an increase in price, which would then lead to entry of firms.` c. An increase in supply would cause an increase in price, which would then lead to entry of firms d. A decrease in supply would cause an increase in price, which would then lead to exit of firms. e. Price of the whiskey would remain unchanged and the existing firms would continue to earn zero economic profit.
With voluntary exchange, a buyer and seller agree to do business together
a. only for the benefit of the seller b. only for the benefit of the buyer c. for the mutual benefit of both d. for the benefit of neither