Consider a market that is in equilibrium. If it experiences both an increase in demand and an increase in supply, what can be said of the new equilibrium? The equilibrium:
A. price and quantity will both fall.
B. price and quantity will both rise.
C. price will definitely rise, while the equilibrium quantity cannot be predicted.
D. quantity will definitely rise, while the equilibrium price cannot be predicted.
Answer: D
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Suppose a decrease in the supply of bottled water results in a decrease in revenue. This indicates that
A) the supply of bottled water is elastic in the price range considered. B) the supply of bottled water is inelastic in the price range considered. C) the demand for bottled water is inelastic in the price range considered. D) the demand for bottled water is elastic in the price range considered.
The purpose of collateral and restrictive covenants is to reduce ________ in debt contracts
A) adverse selection B) transactions costs C) moral hazard D) loan amounts
Pure monopoly is not studied because of its descriptive realism, but because it is a stepping stone toward more realistic models.
Answer the following statement true (T) or false (F)
The profit-maximizing level for all firms, regardless of industry structure, is the output level where
A) TR = MC. B) P = MC. C) ATC = P. D) MC = MR.