Assume that the economy has two sectors, milk and orange juice, and that both sectors are initially in long-run competitive equilibrium. Milk and orange juice are substitute goods
Trace the effects of a change in preferences that increases the demand for orange juice.
If the demand for orange juice increases, there will be an increase in profits in the short run for firms producing orange juice. This will attract additional resources to orange juice until in the long run firms in this sector are again earning a normal profit. The higher demand for orange juice will lead to a lower demand for milk. This will decrease the profits in the short run, causing firms to leave this sector. This frees up resources to be used in the orange juice sector. Firms will continue to leave milk until all the remaining firms are just making a normal return.
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The (false) idea that an industry should be protected because of learning-by-doing until it is large enough to compete successfully in world markets is the ________ argument for protection
A) cheap foreign labor B) infant industry C) dumping D) comparative advantage
An amusement park charges an entrance fee of $75 per person plus $2.50 per ride. This is an example of
A) first-degree price discrimination. B) a two-part tariff. C) second-degree price discrimination. D) bundling. E) tying.
Suppose that the income elasticity of demand for good X is positive but less than 1. Other things being equal, which of the following statements is INCORRECT?
A. Good X is a normal good. B. The quantity demanded of good X decreases as a consumer's income declines. C. A consumer buys more X as income rises, but the share of income spent on good X falls. D. A consumer buys more X as income rises and the share of income spent on good X also rises.
When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as:
A. check kiting. B. check clearing. C. check floating. D. check balancing.