Suppose that the demand for oranges increases. Carefully explain how the rationing function of price will restore market equilibrium
What will be an ideal response?
The increase in demand causes a shortage at the original equilibrium price; the quantity supplied is less than the new quantity demanded at that price. The existence of the shortage will cause the price to rise. As price rises, the quantity supplied will increase and the quantity demanded will decrease (along the new demand curve) until equilibrium is reached at a higher price (and quantity).
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Which school of thought would be considered the most laissez-faire?
A. the mainstream view B. the monetarist view C. the self-correction view D. the real business cycle view
Nick Lewis is a strict vegetarian and dislikes the sight and smell of meat products. He buys a raffle supporting the Josh Gottheil Memorial Fund for Lymphoma Research and wins the 3rd prize: a year's supply of hamburger meat. He is willing to trade with his meat-loving friends, and a trade ensues. This is because the
a. marginal utility of meat for them is positive and for Nick, it's negative b. total utility of meat for them and for Nick is positive c. MU/P of the goods his friends trade away is higher than their MU/P of meat d. MU/P of meat for Nick is higher than the MU/P of the goods he gets for the meat e. his friends have a negative total utility of meat, but wish to help Nick
To increase the money supply
A. the Federal Reserve should reduce its loans to banks. B. the Federal Reserve should buy government securities. C. the commercial banks should reduce their loans. D. the Federal Reserve should sell government securities.
The ratio at which a country can trade its exports for imports from other countries is called
A) a trade barrier. B) the terms of trade. C) autarky. D) a free trade agreement.