A binding price floor:
A. will cause quantity demanded to exceed quantity supplied.
B. will cause quantity supplied to exceed quantity demanded.
C. will increase total well-being.
D. will set a legal maximum price in a market.
B. will cause quantity supplied to exceed quantity demanded.
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The two deadweight triangles are the Consumption distortion and Production distortion losses. It is easy to understand why the Consumption distortion constitutes a loss for society
After all it raises the prices of goods to consumers, and even causes some consumers to drop out of the market altogether. It seems paradoxical that the Production distortion is considered an equivalent burden on society. After all, in this case, profits increase, and additional production (with its associated employment) comes on line. This would seem to be an offset rather than an addition to the burden or loss borne by society. Explain why the Production distortion is indeed a loss to society, and what is wrong with the logic that leads to the apparent paradox.
Assume that a 4 percent increase in income across the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is:
A. negative and therefore X is an inferior good. B. negative and therefore X is a normal good. C. positive and therefore X is an inferior good. D. positive and therefore X is a normal good.
"The optimal level of pollution is zero." Do you agree or disagree? Why?
What will be an ideal response?
Whenever the interest rate goes up, the price of bonds will go down.
Answer the following statement true (T) or false (F)