In a market system, how are the terms of exchange established?
a. Industry associations set up acceptable price ranges for their goods, and firms within each industry are required to set price within its relevant range.
b. The forces underlying supply and demand interact to set a price
c. Federal and state legislation establish minimum and maximum prices.
d. Consumer advocacy groups establish fair prices for items, and most firms comply because they don’t want to anger their customers.
Answer: b. The forces underlying supply and demand interact to set a price
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If the price elasticity of demand for a good is 0.45, it is most likely that the good
a. has many close substitutes b. is a luxury good c. is high-priced d. is a complementary good e. has a demand curve that is price inelastic
The more inelastic the demand for a product, the more likely that the actual benefit of a subsidy granted on the product will
a. go to sellers. b. go to buyers. c. go equally to both buyers and sellers. d. do none of the above.
The sale of stocks
a. and bonds to raise money is called debt finance. b. and bonds to raise money is called equity finance. c. to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. d. to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.
In which direction does the demand curve shift when demand decreases?
a. down
b. up
c. left
d. right