An increase in the supply of a good will cause
a. a decrease in equilibrium price and an increase in equilibrium quantity.
b. an increase in equilibrium price and quantity.
c. an increase in equilibrium price and a decrease in equilibrium quantity.
d. a decrease in equilibrium price and quantity.
Ans: a. a decrease in equilibrium price and an increase in equilibrium quantity.
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Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. What is the market equilibrium price?
A. $50 per gallon B. $20 per gallon C. $100 per gallon D. $25 per gallon
One reason that people hold money is to pay for unexpected car repairs and other unpredictable expenses. This motive for holding money is called:
a. transactions demand. b. precautionary demand. c. speculative demand. d. noncyclical demand.
As one moves down along a linear demand curve (i.e., from high price, low quantity pairs to low price, high quantity pairs), demand:
A. increases. B. becomes more elastic. C. becomes less elastic. D. decreases.
Consider four parcels of peanut growing land. The nonland peanut production costs are $1,000 for Parcel A, $1,200 for Parcel B, $1,600 for Parcel C, and $1,700 for Parcel D. If, before rents are charged, farmers are indifferent between planting on Parcel, then which of the following is true?
A. Parcel A’s rent is $200 and Parcel C’s rent $0. B. Parcel A’s rent is $200 and Parcel B’s rent $400. C. Parcel A’s rent is $600 and Parcel B’s rent $300. D. Parcel A’s rent is $600 and Parcel D’s rent $0.