In the used pick-up truck market:
A. some of the predictions of the lemons model are observed some of the time.
B. the lemons model accurately describes the market.
C. none of the predictions of the lemons model are observed.
D. there is no asymmetric information, and so the lemons model does not apply.
Answer: A
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A manufacturing firm is deciding whether to invest in a new printer that needs an initial investment of $150,000. This will increase cash flows in the first year by $80,000 and $75,000 in the second year. If the interest rate is 10% then the net present value of these cash flows is
a) $5,000 b) - $9,091 c) -$15,290 d) -$21,901
The entry of new firms into an industry will very likely
a. shift the industry supply curve to the right. b. cause the market price to fall. c. reduce the profits of existing firms in the industry. d. All of the above are correct.
Suppose the market for Mexican food in your neighborhood was in equilibrium.a. Draw a diagram showing the demand and supply curve for Mexican food. Indicate the market equilibrium quantity and price in this market.b. Suppose the government imposed a binding price ceiling in this market, with the goal of making Mexican food affordable to most residents. Add the price ceiling to your diagram, and then identify the quantity demanded and quantity supply in this market with the price ceiling.c. Would the government be able to make Mexican food affordable to most people with the price ceiling? Explain your answer using the diagram you drew in part (b).
What will be an ideal response?
Which of the following will cause the demand curve for a good to shift to the right?
A. Decrease in income for a normal good. B. Increase in the price of a complementary good. C. Decrease in the price of the good. D. Increase in the price of a substitute good.