Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), how many lemons (low quality) will be supplied by sellers?
A. 50
B. 125
C. 175
D. 250
Answer: D
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Explain why correlation does not always imply causation. Does causation always imply positive correlation? Explain your answer
What will be an ideal response?
According to the law of comparative advantage, a doctor who is also a talented auto mechanic should
a. get a part-time job at a gas station. b. do her own auto repairs and those of her neighbors. c. hire a professional mechanic to repair her car. d. only repair the cars of other doctors.
Self-adjustment of markets is assumed in:
A. Classical economic theory. B. Keynesian theory. C. Supply-side economic theory. D. The eclectic viewpoint.
If monopolistically competitive firms earn short-run economic profits, we expect to see
A) new firms enter the industry, which shifts the demand curves of the existing firms to the left until firms earn zero economic profits. B) new firms trying to enter the industry, but unable to do so because of barriers to entry. C) existing firms altering their scale of plant to try to capture larger profits. The combined effect is to cause all firms to earn zero economic profits. D) existing firms increasing prices to try to capture larger economic profits.