The above table gives the demand and supply schedules for Blu-ray discs. If the price of a Blu-ray disc is $8, there is a ________ and the price of a compact disc will ________
A) shortage; rise
B) shortage; fall
C) surplus; rise
D) surplus; fall
A
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Suppose a relatively low income family has a monthly budget of $1,000 to allocate between food and a non-food composite good. In this problem, assume food is aggregated into a "composite food" good that is modeled on the horizontal axis, and the non-food composite good is denominated in "dollars of other consumption". The price of food is $10 per unit. Suppose further that this family's tastes exhibit kinks in indifference curves, with one such indifference curve graphed below.
a. Draw the family's budget constraint and label the optimal consumption
bundle. b. Due to unexpected droughts, the price of food rises to $20. A cash subsidy S that leaves our family with the same level of happiness as it enjoyed prior to the price increase is proposed. How much would this subsidy cost for this family? c. An alternative proposal suggests a price subsidy s that lowers the price of food for this family from $20 to ($20-s), with s set sufficiently high to allow the family to reach its original utility level. d. Yet a third proposal suggests a price subsidy that leaves in tact the new price of $20 for the first 20 units of food bought by the family but then lowers the price for this family to $(20-s') while also making the family just as happy as it was before. How high does s' have to be to accomplish this? e. If cost is all you care about, how would you rank these three policies? What if you care about food consumption for this family and believe a policy is better if it results in more food consumption? What will be an ideal response?
Suppose that you were again competing in a sealed-bid auction for the Vermeer painting which you value at $100,000, but now it is a first-price auction. What bid should you submit?
a. Exactly $100,000 b. Somewhat lower than $100,000 depending on the number of other bidders c. Somewhat higher than $100,000 depending on the number of other bidders d. Cannot say which of a, b, or c is right without further information
If a firm produces nothing, it still incurs its fixed costs
a. True b. False Indicate whether the statement is true or false
If the demand for salad dressing increases when the price of lettuce decreases, the cross-price elasticity of demand between salad dressing and lettuce will be ________ because these two goods are ________.
A. equal to 1; inelastic B. negative; substitutes C. negative; complements D. zero; inferior