What is meant by the guiding function of prices?
Please provide the best answer for the statement.
The guiding function of prices refers to the response of producers to changes in prices. With a given supply schedule, if demand increases, the market equilibrium price will rise and producers will respond to that by producing an increased quantity of the product. Also, there may be entry of firms into the industry. Conversely, if demand decreases, the market equilibrium price will fall and producers will respond to that change by producing a decreased quantity of the product. There may also be an exodus of firms from the industry. The market system is a communications system and prices are the way information is communicated and incentives are given to take action.
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Understanding the supply and demand model facilitates
A) greed. B) charity. C) happiness. D) prediction.
Splitting up a monopoly is often justified on the grounds that
a. consumers prefer dealing with small firms b. small firms have lower costs c. competition is inherently efficient d. nationalization is a less preferred option e. monopolies are inevitable and desirable
Total utility can be calculated as the
a. difference between all marginal utilities b. price paid for one good c. sum of all marginal utilities d. total expenditure on all units of the good the consumer buys e. difference between the marginal utilities of the first and last units
If the exchange rate of yen per dollar increases from 100 yen = $1 to 110 yen = $1, then
a. Japanese-produced goods would become more expensive b. the dollar has depreciated c. the yen has appreciated d. U.S.-produced goods would become more expensive e. U.S. exports would increase