A price floor will create the largest surplus when:
A. supply is elastic and demand is inelastic.
B. supply is inelastic and demand is elastic.
C. both supply and demand are inelastic.
D. both supply and demand are elastic.
Answer: D
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Seller A has an upward-sloping supply curve and is willing to supply 400 units of a commodity at a price of $5 per unit. Seller A is now willing to supply 500 units at a price of $5 per unit. Evidently, seller A has experienced a(n):
A. increase in supply. B. decrease in supply. C. increase in quantity supplied. D. decrease in the quantity supplied.
Refer to Figure 18.1. Which of the following would most likely cause a shift from AD3 to AD2?
A. An increase in transfer payments because of a recession. B. An increase in the reserve ratio. C. An increase in taxes. D. A decrease in the discount rate.
Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is $15, we would expect that:
A. demand will decrease until quantity demanded equals quantity supplied. B. supply will increase until quantity demanded equals quantity supplied. C. price will decrease until quantity demanded equals quantity supplied. D. there will be no change in the price since the market is in equilibrium.
If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then
A) to maximize profit the firm should increase output. B) to maximize profit the firm should decrease output. C) to maximize profit the firm should continue to produce the output it is producing. D) Not enough information is given to say what the firm should do to maximize profit.