According to the law of demand, when will higher corn prices reduce the quantity demanded of corn?
A. Always.
B. When the supply of corn is fixed.
C. When nonprice determinants, like income and the number of buyers, are unchanged.
D. When there are no shortages or surpluses of corn.
Answer: C
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Economists have found that the price elasticity of demand for water is higher in the summer than in the winter. Why is this likely to be so?
A. Winter water use tends to be for necessities such as cleaning and cooking, and summer water use tends to be for both necessities and non-necessities such as gardening and recreation. B. Winter is longer than summer, and price elasticity is lower over longer time horizons. C. Summer is longer than winter, and price elasticity is higher over longer time horizons. D. People take more vacations in the summer and so use less water at home.
Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?
A) When there are few firms in the market and the demand curve faced by each firm is relatively inelastic. B) When there are many firms in the market and the demand curve faced by each firm is relatively inelastic. C) When there are few firms in the market and the demand curve faced by each firm is relatively elastic. D) When there are many firms in the market and the demand curve faced by each firm is relatively elastic.
People are likely to want to hold more money if the interest rate
a. increases making the opportunity cost of holding money rise. b. increases making the opportunity cost of holding money fall. c. decreases making the opportunity cost of holding money rise. d. decreases making the opportunity cost of holding money fall.
The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.