In which of the following situations will both market clearing price and the equilibrium quantity increase?
A) an increase in demand with no change in supply
B) an increase in supply with no change in demand
C) a decrease in supply with no change in demand
D) a decrease in demand with no change in supply
Answer: A
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With respect to the labor supply curve, the income effect
A) reinforces the substitution effect. B) lowers the opportunity cost of labor. C) raises the opportunity cost of labor. D) influences a person to work less as the wage rate increases.
When an economy is not in equilibrium,
A) planned expenditures exceed production and income. B) there is no savings nor investment. C) government tax revenues equal planned government expenditures. D) production and income equal planned expenditures.
The existence of counterparty risk
A) has no effect on the contracting parties. B) is disallowed under current government regulations. C) results in information costs for buyers and sellers when analyzing the potential creditworthiness of potential trading partners. D) reduces the risk introduced by forward contracts.
An negative externality is present whenever:
a. the private marginal cost of an activity exceeds the private marginal benefit. b. the private marginal benefit of an activity exceeds the private marginal cost. c. the social marginal cost of an activity exceeds the private marginal cost. d. none of the above