If the equilibrium price of natural gas is $4 per thousand cubic feet and a price ceiling is imposed at $3 per thousand cubic feet, the result will be:
A. a surplus of natural gas.
B. a shortage of natural gas.
C. an accumulation of inventories of unsold gas.
D. more natural gas available than what buyers want to buy.
Answer: B
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In the Stackelberg model, there is an advantage
A) to waiting until your competitor has committed herself to a particular output level before deciding on your output level. B) to being the first competitor to commit to an output level. C) to the firm with a dominant strategy. D) to producing an output level which is identical to a monopolist's output level.
Currently, the national debt is approximately:
a. 10 percent of GDP. b. 60 percent of GDP. c. 80 percent of GDP. d. 120 percent of GDP.
A prolonged period during which stock prices continue to decline is known as a
a. bear market b. bull market c. crash d. depression e. none of these
Imagine that the Fed has unexpectedly lowered the reserve requirement, greatly increasing the amount of money in circulation. Explain what a rational expectations theorist would predict should happen in this situation over both the short run and the long run. Then give an example of what a critic of rational expectations theory would predict instead.
What will be an ideal response?