Consider a market that is in equilibrium. If it experiences both a decrease in demand and an increase in supply, what can be said of the new equilibrium? The equilibrium:
A. price will definitely fall, while the equilibrium quantity cannot be predicted.
B. price and quantity will both fall.
C. quantity will definitely fall, while the equilibrium price cannot be predicted.
D. price and quantity will both rise.
Answer: A
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Which of the following statements is FALSE?
A) Comparative advantage is the principle upon which trade patterns are based. B) Opportunity cost measures the real cost to a country of producing a certain product. C) The gains from trade are the result of differences in opportunity cost and comparative advantage. D) A country that possesses an absolute advantage will always have a comparative advantage. E) Comparative advantage is necessary and sufficient for trade.
Firms that anticipate hold-up, choose organizational or contractual forms
a. To give each party both the incentive to make relationship-specific investments b. To give each party both the incentive to ignore sunk costs c. To give each party both the incentive to reduce investments in reputation d. To give each party both the incentive to make non-specific investments
Who would benefit from an increase in the Consumer Price Index (CPI)?
A. People on fixed incomes B. Wage earners with no cost of living increases C. People who owe other people money D. People who save
________ states that if previously existing distortions exist, a distortionary tax may actually improve efficiency.
A. The principle of second best B. The principle of neutrality C. The rule of reverse distortion D. The benefits-received principle