Roses are more expensive on Valentine's Day than at other times of the year, yet sales of roses are highest on that day. How does economic theory account for this?
A) An increase in demand pushes up the market clearing price of roses.
B) People buying the roses are irrational.
C) Roses are not subject to the law of demand.
D) Florists know that there are no substitutes for roses, so they take advantage of consumers on Valentine's Day.
Answer: A
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When the yield curve is downward-sloping,
A) short-term yields are higher than long-term yields. B) long-term yields are higher than short-term yields. C) the bond market is anticipating the U.S. Treasury may default on its obligations. D) the inflation rate is expected to rise.
When the current state of the economy is such that Real GDP is equal to Natural Real GDP, the economy is in ____________________ . In this situation, the (actual) unemployment rate is ___________ the natural unemployment rate, and there is ________________ in the labor market
A) long-run equilibrium; equal to; equilibrium B) inflationary; less than; a shortage C) long-run equilibrium; greater than; equilibrium D) recessionary; greater than; a surplus E) recessionary; less than; equilibrium
In order to achieve the socially optimal level of output, goods that entail negative externalities should be:
A. taxed. B. banned. C. provided by the government. D. subsidized.
Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:
A) an increase in price and quantity. B) a decrease in price and an increase in quantity. C) a decrease in both price and quantity. D) an increase in price and a decrease in quantity.