Suppose a new law requires all piercing studios to pass tougher licensing tests and to begin using more costly sterilization methods. Other things constant, this law would cause:
A. an increase in the supply of piercings and a lower price for piercings.
B. an increase in the supply of piercings and a higher price for piercings.
C. a decrease in the supply of piercings and a higher price for piercings.
D. a decrease in the supply of piercings and a lower price for piercings.
Answer: C
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Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce output and increase their prices and profits. But some cartels have failed and others are unstable
Which of the following is a reason why cartels often break down? A) Most cartels do not have a dominant strategy. B) Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement. C) Members of a cartel may resent having to share their profits equally. D) When a cartel is profitable the amount of competition it faces increases.
If MUx/Px exceeds MUy/Py, then the consumer should
a. consume more of good X and less of good Y b. consume less of good X and more of good Y c. consume less of both goods X and Y d. not change the consumption levels of X and Y e. consume more of good Z
The self-interest model of government:
a. suggests that government officials are selfish. b. explains why there are limits on government taxation and spending. c. shows who some government projects take place even if the cost exceeds the benefits. d. All of the above.
An intertemporal budget constraint is downward sloping due to ________
A) the trade-off between current and future consumption B) the law of diminishing marginal productivity C) the law of supply D) the law of demand