When a price floor is above the equilibrium price,
a. quantity demanded will exceed quantity supplied, so there will be a shortage.
b. quantity supplied will exceed quantity demanded, so there will be a surplus.
c. the market will be in equilibrium.
d. This is a trick question because price floors are generally set below the equilibrium price.
B
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In a call options contract, the
A) seller has the obligation to deliver the instrument at a specified time. B) buyer has the obligation to receive the instrument at a specified time. C) seller may choose whether or not to deliver the instrument at a specified time. D) buyer will choose to exercise his option only if the value of the underlying security falls.
Suppose that one firm produces a product that results in negative external costs to society. This information suggests that
A) resources are under-allocated to the firm. B) the equilibrium market price of the product includes the external costs borne by society. C) resources are over-allocated to the firm. D) at the market price, quantity demanded is less than quantity supplied.
According to the shortsightedness effect, politicians tend to favor projects with:
a. short-run benefits and short-run costs. b. short-run benefits and long-run costs. c. long-run benefits and short-run costs. d. long-run benefits and long-run costs.
If the cross-price elasticity is negative, we can conclude that the two goods are ______ because the price of one good and the demand for the other move in opposite direction.
a. surrogates b. substitutes c. complements d. contradictory