Why is it true that shortages usually occur mainly when price controls are in effect?
What will be an ideal response?
In the absence of price controls the shortage usually goes away quickly because prices are bid up to eliminate the excess demand. But with price controls in effect the shortage usually persists. This helps explain why we usually only see long lines in effect when the government imposes a price ceiling like it did during the 1970s so-called gas crisis.
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Refer to Figure 2-5. If the economy is currently producing at point X, what is the opportunity cost of moving to point W?
A) 5 million tons of paper B) 3 million tons of steel C) 9 million tons of paper D) 19 million tons of steel
A theory is a(n) __________ representation of how two or more variables interact with each other.
a. simplified b. complex c. alternative d. contradictory
If the price of inputs rises and foreign income rises:
a. Price index falls, and real GDP rises. b. Price index falls, and real GDP falls. c. Price index falls, and the change in real GDP is uncertain. d. Price index rises, and the change in real GDP is uncertain. e. The change in price index is uncertain, and real GDP falls.
Some economists hypothesize that international trade has altered the relative demand for skilled and unskilled labor, changing the gap in earnings between these two groups. Which of the following statements best describes this hypothesis?
a. Unskilled labor is plentiful and cheap in the US, so the US tends to export goods produced with unskilled labor and import goods produced with skilled labor. b. Unskilled labor is plentiful and cheap in many foreign countries, so the US tends to import goods produced with unskilled labor and export goods produced with skilled labor. c. Computers raise the demand for skilled workers and reduce the demand for the unskilled workers whose jobs are replaced by the computers. d. Greater demand for skilled labor has led to higher wages for those workers and greater demand for imported products.