Assume the income of consumers of good X (a normal good) increases. What occurs at the initial equilibrium price for X that signals market participants that the equilibrium price must change?
A) A surplus is created by an increase in supply.
B) A surplus is created by a decrease in demand.
C) A shortage is created by an increase in demand.
D) A shortage is created by a decrease in supply.
C
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A restriction on imports is likely to reduce further restrictions on trade
Indicate whether the statement is true or false
If price fixing by competitors is necessary because without it a firm will go bankrupt, is the price fixing legal?
What will be an ideal response?
If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then
A) marginal revenue is less than price. B) price exceeds average total cost. C) total revenue equals total cost. D) average total cost is at a minimum.
According to the Lucas critique, if past increases in the short-term interest rate have always been temporary, then
A) the term-structure relationship using past data will then show only a weak effect of changes in the short-term interest rate on the long-term rate. B) the term-structure relationship using past data will show no effect of changes in the short-term interest rate on the long-term rate. C) one cannot predict the term-structure relationship as it depends on expectations. D) the term-structure relationship using past data will nevertheless show a strong effect of changes in the short-term interest rate on the long-term rate because of a change in the way expectations are formed.