Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve from S to S1 in diagram (a) might be caused by a per-unit
What will be an ideal response?
tax on the producers of this product.
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
A firm charges a price below its average total cost so that it drives out its competition. This is an example of:
A. a tie-in sale. B. duopoly pricing. C. price discrimination. D. predatory pricing.
According to your text, during the 2010s, the inflation rate was in which range of percentages?
A. 0-5% B. 10-15% C. 15-20% D. 5-10%
Rent seeking in the form of lobbying for an increase in import tariffs by domestic producers
A) increases consumer surplus. B) increases total welfare. C) increases the deadweight loss. D) None of the above.