Consumers tend to accept the market restrictions imposed by suppliers because:
A. government prevents them from organizing.
B. their costs of organizing are higher than the cost of the collusion by the suppliers.
C. they see themselves as laborers and therefore benefit from restrictions.
D. when combined, their losses are small for the group as a whole.
Answer: B
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The interest rate that the Fed charges on loans made directly to banks is called ________.
A. the prime rate B. the discount rate C. interest on reserves D. the federal funds rate
Give an example that shows price inelasticity of supply. Avoid using examples from the text.
What will be an ideal response?
Refer to the above figure. Suppose that the economy was originally at point A, and then it reached point C by means of a fiscal policy action. Which of the following is correct?
A. Point C is a short-run equilibrium that could have been attained through a reduction in government spending, but in the long run the economy will end up at point B. B. Point C is both a short-run equilibrium and a long-run equilibrium that could have been attained through an increase in government spending. C. Point C is a long-run equilibrium that could have been attained through a tax increase, although reaching this point first required a short-run equilibrium at point B. D. Point C is a short-run equilibrium that could have been attained through a tax cut, but in the long run the economy will end up at point B.
Which of these would economists consider the worst?
A. inflation of 5% B. deflation of 5% C. depression D. recession