The market for Product A is at equilibrium at a price of €35. How will the market be affected if the government introduces a ceiling price which is €15 below the equilibrium price?
a) The ceiling price will have no effect on the market.
b) The new price for product A will be €20 and there will be excess demand at this price.
c) The new price for product A will be €50 and there will be excess supply at this price.
d) The market mechanism will ensure that the market returns to equilibrium.
Answer: b) The new price for product A will be €20 and there will be excess demand at this price.
You might also like to view...
Which of the following terms describes the process in which the exchange rate equalizes the prices of internationally traded goods across countries?
a. purchasing power parity b. exchange c. profiteering d. arbitrage
What kind of relationship appears to actually exist, if one examines the actual data regarding the inflation rate and the unemployment rate for all years since 1953?
A. an inverse relationship B. a one-to-one relationship C. a direct relationship D. no relationship in the long run
An investment is ________ if it is hedged against exchange-rate risk.
A. risk neutral B. covered C. speculative D. uncovered
A country will specialize in the good for which
A. it has moderate production costs. B. it has absolute advantage. C. it can produce at minimum average cost. D. it has comparative advantage.