Three individuals have $1000 and identical preferences for gum, g, and cigarettes, s, as measured by the utility function U(g,s) = 10g0.9a0.1. The price of gum is $9 and the price of cigarettes is $12
What is the market surplus/shortage at a price of $12 when the supply of cigarettes is 5? A) There will be a shortage of 3 cigarettes.
B) There will be a surplus of 3 cigarettes.
C) There will be a shortage of 2/3 cigarettes.
D) There will be a surplus of 2/3 cigarettes.
A
You might also like to view...
Everything else held constant, in the market for reserves, when the supply for federal funds intersects the reserve demand curve along the horizontal section of the demand curve, lowering the interest rate paid on excess reserves
A) increases the federal funds rate. B) lowers the federal funds rate. C) has no effect on the federal funds rate. D) has an indeterminate effect of the federal funds rate.
Susan buys automobile insurance from Provident Insurance Company. If Susan avoids having an accident for three years, Provident will reduce the premiums she has to pay for her insurance. Nevertheless, she routinely drives while eating or texting and speeds up to try to make it through yellow lights
a. This is an adverse selection problem which should be corrected with government intervention. b. Susan is a principal and Provident is an agent in this principal-agent problem. c. This is a moral hazard problem. d. There is no way for Provident to determine whether Susan is a cautious or risky driver.
The government's budget deficit refers to the:
A. Total amount of debt that the government has incurred over the years B. Difference the nation's amount of exports and its total amount of imports C. Gap between high government spending and its lower tax revenues D. Decrease in the amount of government spending form one year to the next
The Fed's lender-of-last-resort function
A) has proven to be ineffective. B) cannot prevent runs by large depositors. C) is no longer necessary due to FDIC insurance. D) creates a moral hazard problem.