In general, a policy that limits entry into a market
A. increases price, decreases quantity, and causes inefficiency in the market.
B. increases the demand for the product which decreases the supply
C. decreases price, increases quantity, and causes inefficiency in the market
D. will stabilize a market so the there are fewer disruptions:
Answer: A. increases price, decreases quantity, and causes inefficiency in the market.
Explanation: A policy that limits or make it difficult for new firms to enter a market would make the market less competitive and less contestable. The limits to entry which exist will cause inefficiency because of the lack of contestability in the market that often leads to an increase in prices and reduction in quantity.
You might also like to view...
If the Fed fears inflation, then the Fed
A) directs banks to raise the nominal interest rate. B) will increase the income tax rate on interest income. C) directs banks to lower the nominal interest rate. D) will sell government securities in the open market. E) will buy government securities in the open market.
Suppose political unrest in a major oil producing country leads to a reduction in the supply of crude oil, a resource used to produce gasoline. If the government fixes the price of gasoline in order to prevent price gouging, which of the following will result?
a. The supply of gasoline will increase, because suppliers still need to sell gas. b. The demand for gasoline will decrease, because consumers will curb consumption at the fixed price. c. A shortage of gasoline will occur, because at the fixed price consumers will not have incentive to decrease consumption. d. Everyone will be able to purchase the desired amount of gas, because at the fixed price both sellers and buyers will carry on business as usual.
The average tax rate can be calculated by which of the following formulas?
A) the change in taxes due divided by the change in taxable income B) the change in taxable income divided by the change in taxes due C) total taxes due divided by total taxable income D) total taxable income divided by total taxes due
According to mainstream economic analysis, a balanced-budget rule for fiscal policy would be:
A. Countercyclical B. Ineffective C. Destabilizing D. Pro-growth