Which of the following would be expected to cause the quantity of wool supplied to decrease?
A. A decrease in the number of wool producers
B. An increase in wages paid to workers in the wool industry
C. A decrease in the price of wool
D. An increase in the cost of raising sheep
Answer: C
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A market system works very well in solving some basic problems of the economy but it fails in some cases. Provide examples.
What will be an ideal response?
If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded, then the price elasticity of demand is 0.50
a. True b. False
If the price of a good increases and the total revenue also increases, the good has a(n)
A. perfectly elastic demand. B. unit elastic demand. C. elastic demand. D. inelastic demand.
Suppose the Fed announced a policy of rapid growth in the money supply in 2004, but then put the brakes on money expansion without any announcement. If in 2005, Fed officials announce again that an expansion is planned, it is most likely that:
a. people will believe in the announcement since the conditions that created a need for the expansion are probably still in effect. b. people will believe in the announcement since they consider that having failed to implement the expansion previously, the Fed still plans to do so. c. people will not believe in the announcement since they consider that the conditions that created a need for the expansion must have changed in the meantime. d. people will not believe in the announcement since they consider that having failed to implement the expansion previously, the Fed will probably fail again e. there will be further uncertainty about the Fed following through on the policies it announces.