In Figure 2.1, Box 3 would be labeled
A. S for supply.
B. D for demand.
C. P for price.
D. P* for equilibrium price.
Answer: D
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
Cross-price elasticity of demand is
A. negative for substitute goods. B. positive for general goods. C. negative for complementary goods. D. unitary for secondary goods.
Black markets can occur when price ceilings are imposed in a market. Which of the following explains why sellers participate in a black market?
A) Sellers are able to sell the product for a higher than legal price. B) There are more buyers in the black market than in the legal market. C) The demand is perfectly elastic in a black market. D) The demand is perfectly inelastic in a black market. E) The surplus in the legal market means that many sellers can sell their product in the black market.
________ arises when one party to a contract changes behavior in response to that contract, passing the cost of that change in behavior to the other party.
A. Moral hazard B. Market signaling C. Logrolling D. Adverse selection