You own a company that produces coasters. You set the price at $10 for a set of six coasters. Then you produced 10,000 sets. After one year, you realize you have a surplus of 4,000 sets. What steps would you take to reach equilibrium?
What will be an ideal response?
Should show a thorough understanding of equilibrium, surplus, and shortage. For example, the company could reduce the price to $7 per set of coasters and decrease the amount supplied to 8,000 sets per year. If the company still has a surplus, it would have to make more adjustments until all the coasters produced in a year are purchased without additional unmet demand. The main point is to reduce the price and the amount produced, but not to such an extreme that would create a shortage.
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In the figure above, if the wage rate is $6 per hour, then the
A) firms' surplus is the area d + e + f. B) workers' surplus is the area a + b + c. C) deadweight loss equals zero. D) Only answers A and C are correct. E) Answers A, B, and C are correct.
Why do you supposed that it is easier for a government to protect and maintain a domestic monopoly for a particular industry but next to impossible to accomplish if this firm operates internationally?
What will be an ideal response?
Use the following statements to answer the question:
I. Consider the problem of negotiating the price of a rug that costs $100 to make. If there are two buyers (one with a maximum willingness-to-pay of $200 and one with a maximum willingness-to-pay of $250 ), then the situation is no longer a constant sum game. II. The likely outcome from the game described in statement I is that the second buyer will bid a price slightly above $200 (e.g., $201 ) to win the rug. A) I and II are true. B) I is true and II is false. C) II is true and I is false. D) I and II are false.
In the absence of discrimination, as human capital investments increase, wages will generally
A) decrease. B) increase. C) not change. D) increase or decrease.