Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5 both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both
Camille's and Julia's to:
A. raise their price and reduce their quantity supplied.
B. raise their price and increase their quantity supplied.
C. lower their price and reduce their quantity supplied.
D. lower their price and increase their quantity supplied.
Answer: B
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The supply of milk in Nexus City is perfectly elastic. If a tax is imposed on each gallon of milk sold, ________
A) the burden of the tax will fall entirely on the sellers B) the burden of the tax will fall entirely on the buyers C) the tax incidence on the sellers is higher than that on the buyers D) the deadweight loss due to taxation is zero
If the U.S. government imposes a quota on leather shoes, then net exports of U.S. shoes would
a. rise. b. not change. c. fall. d. rise, not change, or fall depending on what happened to the exchange rate.
Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:
A. have internalized all costs and benefits. B. have used a command-and-control policy rather than a market-based policy. C. underproduce the good that is resulting in the negative externality. D. reduce the costs to the buyers and sellers of the good.
Michelle transfers $4,000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?
A. M1 decreases and M2 increases B. M1 increases and M2 decreases C. M1 increases and M2 stays the same D. M2 increases and M1 stays the same