A fear that consumption of ice cream may be related to a life threatening disease spreads rapidly through France. The market result will be:
a. the demand falls, price decreases and therefore French consumers buy more ice cream.
b. the demand falls, price decreases and the quantity supplied therefore falls.
c. a fall in demand followed by a fall in supply.
d. the equilibrium quantity falls, but the price does not change.
b. the demand falls, price decreases and the quantity supplied therefore falls.
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The amount of loans that a bank can create is limited by
A) a law enacted by Congress. B) the bank's excess reserves. C) a directive from the Federal Reserve System, which takes into account the bank's financial stability. D) the real interest rate. E) the bank's government securities.
The default risk premium is
A) relevant only for securities issued by very small companies. B) the additional yield a saver requires for holding a bond with some default risk. C) zero for corporate bonds, but quite substantial for corporate stock. D) constant across the business cycle.
To provide quantitative answers to policy questions
A) it is typically sufficient to use common sense. B) you should interview the policy makers involved. C) you should examine empirical evidence. D) is typically impossible since policy questions are not quantifiable.
The Internet has created some special problems of intellectual property. One problem is that the
a. Internet is a monopoly, so the price of intellectual property exceeds marginal cost b. Internet market has not yet reached equilibrium c. property that can be downloaded, modified, and then re-sold d. marginal cost of enforcing property rights exceeds the marginal benefit e. price of intellectual property usually exceeds the marginal benefit