If there is a shortage in a free market, then
A) consumers will offer to pay a lower price for the good, and the price will fall toward the equilibrium level.
B) consumers will offer to pay a higher price for the good, and the price will rise toward the equilibrium level.
C) suppliers will decrease their output to match demand.
D) suppliers will accept any price below equilibrium.
Answer: B
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What is the economic reasoning behind the proposal to legalize drugs?
A. Legal drugs will greatly increase the supply, which will reduce the price Americans pay to foreign producers of the drugs. B. All forms of government restrictions on behavior are immoral and ought to be removed. C. Legal drugs will be much cheaper than illegal drugs, which will reduce incentive for crime to obtain money for drugs and to protect drug “businesses.” D. Legal drugs will be more expensive than illegal drugs, and the market system will encourage more production, thus lowering the price. E. Dealing with supply is always easier than dealing with demand, and legalization accomplishes that.
Daniel enjoys both soda and pizza, allocating his purchases across these two goods so that his utility is maximized. If Daniel receives one-third as much utility from the last can of soda as from the last slice of pizza, we can say that:
a. the price of pizza is one-third that of soda. b. the price of pizza is equal to that of soda c. the price of pizza is twice that of soda. d. the price of pizza is three times that of soda.
Which of the following products has the most elastic demand?
A. Ben and Jerry's Chunky Monkey ice cream in the pint container B. all Ben and Jerry's ice cream C. all premium ice cream D. all ice cream
The short-run supply curve of a perfectly competitive firm is based primarily on its
A. MC curve. B. AVC curve. C. AFC curve. D. ATC curve.