Exhibit 3-6 Milk market
Price per Quart
Quantity Demanded
(Quarts per week)
Quantity Supplied
(Quarts per week)
0.70
20
180
0.60
60
140
0.50
100
100
0.40
140
60
0.30
180
20
In Exhibit 3-6, which of the following is true about the milk market?
?
A. At price 0.60 there is an excess demand of milk.
B. At price 0.40 there is an excess supply of milk.
C. At price 0.70 there is an excess supply of milk.
D. At price 0.50 there is an excess demand of milk.
Answer: C
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If firms in a competitive price-searcher market are incurring economic losses, which of the following scenarios would best describe the change existing firms (who are able to stay in the market) would face as the market adjusts to long-run equilibrium?
a. An increase in demand for each firm and lower prices. b. A decrease in demand for each firm and lower prices. c. An increase in demand for each firm and higher prices. d. A decrease in demand for each firm and higher prices.
Cashews and asparagus are normal goods. When the price of asparagus falls, the substitution effect by itself causes
a. the consumer to feel richer, so the consumer buys more cashews. b. the consumer to feel richer, so the consumer buys less cashews. c. cashews to be relatively more expensive, so the consumer buys less cashews. d. cashews to be relatively less expensive, so the consumer buys more cashews.
In macroeconomics, the long run refers to:
A. how long it takes for output decisions to adjust to changes in economic conditions. B. how long it takes for prices of inputs to fully adjust to changes in economic conditions. C. how long it takes for fixed inputs to become variable. D. the time period when sticky wages are in place.
Answer the following statement true (T) or false (F)
1) An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy. 2) Because economic generalizations are simplifications from reality, they are impractical and useless. 3) If economic theories are solidly based on relevant facts, then appropriate economic policy becomes obvious and uncontroversial. 4) Normative statements are expressions of facts.