In a market system, what must take place for quantity demanded to continually be equated with quantity supplied?
A) Price controls must be applied by governments.
B) Relative prices must be able to adjust to market clearing levels.
C) Tastes and preferences of consumers must adjust to eliminate surpluses or shortages.
D) Businesses must engage in involuntary, unprofitable exchanges to eliminate surpluses or shortages.
Answer: B
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Which of the following is true if the production of a good gives rise to a positive externality?
A) The marginal social benefit from each level of output exceeds the consumers' willingness to pay. B) The marginal private benefit from production exceeds the marginal social benefit. C) The demand curve for the good shifts to the left in the presence of positive externalities. D) The demand curve for the good shifts to the right in the presence of positive externalities.
A newspaper story recently reported that the price of new cars has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by:
What will be an ideal response?
In the basic Keynesian model, a decrease in government purchases:
A. reduces potential output. B. increases potential output. C. increases short-run equilibrium output. D. reduces short-run equilibrium output.
The monopsonist's markdown in the buying price increases as
A) the supply elasticity declines. B) the supply elasticity increases. C) the demand elasticity declines. D) the demand elasticity increases.