In building a model the assumption that allows economists to study only the factors being analyzed is the
A. the self-interest assumption.
B. rationality assumption.
C. the scarcity assumption.
D. ceteris paribus assumption.
Answer: D
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An article in The Economist reported that prices of CDs in Britain were much higher than prices in the United States or other European countries. There were only a few major companies, and a report from a Parliament committee said there was no serious price competition. The best explanation for this is that
A. the industry was a contestable market. B. there were entry barriers in production and distribution of CDs. C. firms were avoiding profit opportunities. D. there was substantial differentiation of products.
The experience of the United States and other industrialized countries in the 1930s contradicts the classical view of the labor market where the money wage adjusts quickly to maintain full employment. On this issue
a. the Keynesians agree but the monetarists disagree. b. the monetarists agree but the Keynesians do not agree. c. both the Keynesians and monetarists are in agreement. d. neither the Keynesians nor the monetarists agree.
Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Suppose the government imposes a $2.00 per gallon tax on milk. The new general equilibrium price of milk is:
A. $2.37. B. $4.37. C. $0.37. D. $3.39.
The price of pork can be increased by:
a. A subsidy to pork producers b. Decreased advertising of pork c. A decrease in the cost of feed for pork producers d. An increase in the cost of beef