In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the
equilibrium quantity (Q) of X. Refer to the given information. An increase in the price of a product that is a close substitute for X will:
A. decrease D, increase P, and decrease Q.
B. increase D, increase P, and decrease Q.
C. increase D, increase P, and increase Q.
D. increase D, decrease P, and increase Q.
Answer: C
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In the above figure, if the economy is at point A, which of the following is TRUE?
A) There is a recessionary gap. B) There is an inflationary gap. C) Point A is the long-run equilibrium point. D) None of the above answers are correct.
The Congressional Budget Office projects that Social Security spending will rise from 5% of GDP to 6% over the next four decades. Why is that a problem?
What will be an ideal response?
Joe and Rita each have some milk and cookies (Milk on the horizontal axis). Joe's MRS of cookies for milk is 2. Rita's MRS of cookies for milk is 4. Which of the following statements is TRUE?
A) No gains from trade are possible. B) Both Rita and Joe can be made better off if Rita gives Joe some cookies in exchange for milk. C) Rita and Joe are on the contract curve. D) Both Rita and Joe can be made better off if Joe gives Rita some cookies in exchange for milk.
If demand is price inelastic,
a. price and total revenue change in opposite directions b. a seller should decrease the price to increase total revenue c. too few goods are being produced from society's point of view d. price and total revenue change in the same direction e. the market can never be in equilibrium