If the government imposes a maximum price that is above the equilibrium price,
A. demand will be greater than supply.
B. quantity demanded will be less than quantity supplied.
C. this maximum price will have no economic impact.
D. the available supply will have to be rationed with a nonprice rationing mechanism.
Answer: C
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A black market
A) is legal only when it is associated with government price ceilings. B) is defined as the deadweight loss associated with taxes. C) benefits no one. D) is a potential outcome of a price ceiling. E) is always legal.
If firms in monopolistic competition are earning economic profits, then
A) they can expect to earn the profits indefinitely. B) new rivals enter the industry, and the demand for any seller's good decreases. C) the market demand becomes more inelastic. D) the industry is in long-run equilibrium. E) new rivals enter the industry, and the demand for any seller's good increases.
The law of ________ refers to a consumer's decrease in additional satisfaction as she consumes more and more units of a good.
A. infinite demand B. utility maximization C. diminishing marginal utility D. consumer choice
Suppose the US imposes tariffs on China, which retaliates with tariffs of its own. The ensuing trade war causes both countries to begin producing goods at higher costs than before because of the loss of comparative advantage. Assuming the IS curve does not shift, in general equilibrium, the outcome is a ________ level of output and a ________ real interest rate.
A. lower; higher B. higher; lower C. lower; lower D. higher; higher