The government sometimes creates an excess demand for a product by setting a maximum price at which the product may be sold to consumers. This is sometimes called a:
A. price ceiling.
B. price floor.
C. tax.
D. subsidy.
Answer: A
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A) less; more B) less; less C) more; more D) more; greater
Consider the market for nonalcoholic beers from the previous question. Which of the following is the best-response function for Boors from the Bertrand game?
a. PB = -2.5 + .05PC b. PB = 2.5 + .05PC c. PC = 2.5 - .05PB d. PB = 2.5 - .15PC
The circular-flow diagram is a
a. visual model of the economy. b. visual model of the relationships among money, prices, and businesses. c. model that shows the effects of government on the economy. d. mathematical model of how the economy works.
A budget constraint shows
a. the maximum utility that a consumer can achieve for a given level of income. b. a series of bundles that cost the consumer the same amount of money. c. a series of bundles that give the consumer the same level of utility. d. All of the above are correct.