If the government imposes a maximum price in a market that is below the equilibrium price:
A. total surplus in the market increases.
B. total surplus in the market decreases.
C. total surplus in the market does not change.
D. total surplus may increase or decrease, depending on whether costs are increasing or decreasing in production.
Answer: B
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According to the Bureau of Economic Analysis, household disposable income fell by 0.3 percent of August, 2012. If all else remains the same, what is the likely impact of this fall on the real interest rate?
A) The real interest rate will rise. B) The real interest rate will fall. C) A change in household disposable income will have no impact on the real interest rate. D) The impact on the real interest rate is ambiguous.
The percent by which import prices rise when the home currency depreciates by 1% is the degree of
A) pass-forward from exchange rates to import prices. B) pass-through from exchange rates to import prices. C) pass-on from exchange rates to import prices. D) roll-forward from exchange rates to import prices. E) pass-beyond from exchange rates to import prices.
Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Which of the following gives the market-clearing curve for milk?
A. Pm = 4 - (Pc/6) B. Pm = (32/12) - (Pc/6) C. Pm = (32 - 2Pc)/12 D. Pm = (32/12) + (Pc/6)
Rent controls create distortions in the housing market by:
A. increasing the supply of housing in the long run. B. raising property values. C. encouraging landlords to overspend for maintenance. D. discouraging new housing construction.