If producers incorrectly set the price of their product too low a:
A. surplus will result and excess goods in inventory will signal the producers to restrict output until sales increase.
B. shortage will result and consumers will bid the price up to equilibrium.
C. surplus will result and excess goods in inventory will signal the producers to lower their prices.
D. shortage will result and consumers will bid the price down to equilibrium.
Answer: B
You might also like to view...
As long as there is asymmetric information among consumers and positive search cost, if price is below the monopoly price and the same across all firms, then a competitive firm
A) can always profit from raising its price. B) can always profit from lowering its price. C) can profit from raising its price but by no more than the search cost. D) can profit from lowering its price but by no more than the search cost.
When the potential threat of new entrants serves to moderate prices in highly concentrated industries, this is called
a. monopoly power b. barriers to entry c. price discrimination d. contestable markets e. nationalization
Economist A says all of the following: The economy needs expansionary fiscal policy to remove it from a recessionary gap. Government should either raise its _____________ or cut ___________________. I believe the government spending multiplier is ____________ than the tax multiplier, so I favor _____________________
A) spending; taxes; larger; cutting taxes B) taxes; spending; larger; raising; spending C) spending; taxes; larger; raising; spending D) b or c E) a or c
According to the textbook, expensive advertising campaigns are:
A. a waste of resources because they provide no useful information about product quality. B. not a credible signal of quality because of adverse selection. C. only a credible signal of product quality if they mention a money-back guarantee. D. a credible signal of product quality.