Explain why a price ceiling, when applied to a market, inevitably generates chronic excess demand for the good
A price ceiling sets the allowable price below its equilibrium level. Because it is below equilibrium price,
quantity supplied is less than the quantity supplied at equilibrium and quantity demanded is greater than
quantity demanded at equilibrium. The gap between quantity demanded and quantity supplied at the below-
equilibrium price, that is, at the price ceiling, remains.
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Good A has a perfectly inelastic demand and an upward-sloping supply curve. Good B has a perfectly inelastic supply and a downward-sloping demand curve. If the same sales tax is imposed on the sellers of both good A and good B, the price paid by
A) buyers of good A rises by more than the price paid by buyers of good B. B) buyers of good B rises by more than the price paid by buyers of good A. C) buyers of good A rises by the same amount as the price paid by buyers of good B. D) More information is needed to determine whether the price paid by buyers of good A rises by more than, less than, or the same amount as the price paid by buyers of good B.
In monopolistically competitive markets, economic losses ____, and ____ shifts the demand curve of the remaining firms to the ____
a. signal some remaining firms to exit; exit; right b. signal some remaining firms to exit; exit; left c. signal new firms to enter; entry; left d. signal new firms to enter; entry; right
Which of the following is correct? In the 1990's
a. the Fed maintained low inflation because it had to follow a policy rule. b. the Fed maintained low inflation even without being required to follow a policy rule. c. the Fed was not required to follow a policy rule and let inflation move higher. d. the Fed was required to follow a policy rule, but it provided the Fed enough discretion that inflation moved higher.
When the economy overheats, the government sometimes cools it down with higher taxes, spending reductions, and less money. Which of the following indicates the appropriate change in the U.S. economy after government intervention?
A. Aggregate demand shifts to the left B. Aggregate demand shifts to the right C. The economy moves up along the aggregate demand curve D. The economy moves down along the aggregate demand curve