Assume a market price gets set artificially low-that is, it gets set below the equilibrium price. This change means:
A. Every producer loses surplus, and it all gets transferred to consumers.
B. Some producers drop out of the market, and those left lose some surplus.
C. Every consumer gains surplus, due to the lower price now being charged.
D. None of these is true.
B. Some producers drop out of the market, and those left lose some surplus.
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In a competitive market, which of the following is a defining characteristic?
A. The firm sets its own prices. B. The firm takes prices set by the government. C. The firm can easily enter the market but not exit the market. D. The firm is just one of many firms within that market.
The income elasticity of demand for food is roughly 1. A consumer's monthly income is $2,000, of which 20% is spent on food. If the income of this consumer doubles, the amount she'll spend on food will be
A. $800 per month. B. $1,000 per month. C. $500 per month. D. $400 per month.
When the economy is hit by a temporary negative supply shock and the central bank does not respond by changing the autonomous component of monetary policy, then in the long run
A) inflation will be lower. B) output will be at its potential. C) output will be lower. D) inflation will be unchanged. E) both B and D.
The net benefits that a nation receives from trade are called its gains from trade.
a. true b. false