Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk. The group argues that such a policy would save the "family farm"
Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve, determine the resulting price, output and social welfare from such a policy. Compare this result to the competitive equilibrium.
Producer surplus is maximized at a price that is midway between the supply curve and the demand curve intercept. Compared to the competitive equilibrium, a lower quantity is sold at a higher price. The area from this new quantity to the competitive quantity in between the demand and supply curves represents the loss of consumer surplus that is not gained by anyone—the deadweight loss.
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The natural rate hypothesis states that when the inflation rate ________, in the short run the unemployment rate ________ and in the long run the unemployment rate ________
A) falls, decreases; decreases B) rises, decreases; returns to the natural unemployment rate C) falls, increases; decreases D) falls, decreases; returns to the natural unemployment rate E) rises, decreases; decreases
Consider a demand curve that has a constant elasticity value of 0. What happens to quantity demanded and total revenue when price increases?
A) The quantity demanded does not change but total revenue decreases. B) The quantity demanded and total revenue fall to zero. C) The quantity demanded and total revenue remain the same. D) The quantity demanded does not change but total revenue increases.
Which of the following can reduce the level of economic growth?
A. Crowding out. B. Technological improvements. C. Higher ratios of capital to labor. D. Crowding in.
Comparing market values over time has the
What will be an ideal response?