Suppose a consumer advocacy group has convinced legislators that vitamin pills should be free to consumers. Such a policy would enhance the health of the citizenry, they argue
Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve, determine the resulting output and social welfare from such a policy. Compare this result to the competitive equilibrium.
Consumer surplus is maximized when price equals zero. Output will be the quantity where the demand curve hits the quantity axis. The social welfare is less than the competitive result because for quantities beyond the competitive equilibrium, producers incur a cost for which they are not reimbursed. Some of this loss represents a transfer to consumers (the area under the demand curve to the right of the equilibrium quantity). The area above the demand curve and below the supply curve for quantities beyond the equilibrium quantity represents the deadweight loss.
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Which of the following pairs of goods are likely to be considered complements?
A) Pens and writing pads B) Laptops and electric heaters C) Motorcycles and typewriters D) Nokia and Samsung cell phones
A Japanese automobile manufacturer building an auto plant in the United States creates a
a. supply of dollars and demand for yen in the foreign exchange market. b. demand for dollars and a supply of yen in the foreign exchange market. c. demand for both dollars and yen in the foreign exchange market. d. supply of both dollars and yen in the foreign exchange market.
A market system solves the
A. “what” and “how” decisions but not the “to whom.” B. “what” and “to whom” decisions but not the “how.” C. “how” and “to whom” decisions but not the “what.” D. “what,” “how,” and “to whom” decisions.
Both France and the United Kingdom successfully used exchange-rate targeting to lower inflation in the late 1980s and early 1990s by tying the value of their currencies to the
A) U.S. dollar. B) German mark. C) Swiss franc. D) Euro.