Suppose a hurricane hits Alabama, causing widespread damage to houses and businesses. The governor of Alabama places price ceilings on all building materials to keep the prices reasonable. Which of the following is the most likely result?
A. A faster recovery from the storm.
B. The supply of building materials to Alabama will increase.
C. More people will be able to purchase building materials.
D. Shortages of building materials and a slower recovery from the storm.
Answer: D
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Suppose a consumer is spending all of his/her income on two goods, A and B, in a manner where MUa = 15 and MUb = 75, and the Pa = $3 and the Pb = $15, then the consumer:
a. is maximizing his/her utility. b. should increase his/her purchases of B and decrease the purchases of A. c. should spend more money on both goods. d. should spend less money on both goods. e. should increase the purchases of A and decrease the purchases of B.
The excess burden or deadweight loss of a tax refers to the
a. increase in product price as a result of the tax. b. growth in government funded programs as a result of the revenue generated by the tax. c. loss of disposable income consumers suffer from the tax. d. reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.
What is the difference between first-, second- and third-degree price discrimination?
Monopolistically competitive industries are inefficient because:
A. they realize diseconomies of scale. B. advertising costs retard technological advance and product development. C. they are overpopulated with firms whose plants are underutilized. D. monopolistically competitive sellers engage in misleading advertising.