If there is excess demand in a perfectly competitive market, does the government need to intervene to restore the equilibrium price and quantity?
What will be an ideal response?
No, in a perfectly competitive market, no government intervention is required to restore equilibrium as equilibrium is automatically restored. A situation of excess demand occurs when the market price is below the equilibrium price. Because quantity demanded exceeds quantity supplied in the market, some consumers will be willing to pay higher prices to buy goods. This will act as an incentive for suppliers to supply more, eliminating the shortage in the market.
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Describe some of the gains from lowering trade barriers that may be difficult to measure
What will be an ideal response?
According to Thomas (1954), increased immigration provided incentive to invest in capital that was
(a) labor-using, resulting in capital widening. (b) labor-using, resulting in capital deepening. (c) labor-saving, resulting in capital widening. (d) labor-saving, resulting in capital widening.
The income effect of higher wages leads workers to want to work more
a. True b. False Indicate whether the statement is true or false
Which of the following is a unique characteristic of the oligopolistic market structure?
a. low barriers to entry b. a large number of firms producing highly differentiated products that are complements to each other c. product differentiation among the products produced by individual firms d. mutual interdependence among firms in demand, and thus, in price decisions