In a market with supply and demand curves as shown below, a price ceiling of $2.50 will result in:
A. A surplus of 10 units
B. A shortage of 10 units
C. No shortage or surplus
D. A black market price greater than $2.50
C. No shortage or surplus
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Which of the following is true regarding value, transaction costs, and exchange?
a. Middlemen can be viewed as agents who create value by reducing transaction costs and, thereby, facilitating gains from exchange. b. Middlemen fail to create value since they do not expand the supply of physical goods. c. A good or service has a given value regardless of who uses it or how it is used. d. Voluntary exchange reduces value by channeling goods into the hands of people who value them least.
Economists are fond of calculating measures of elasticity. If we calculate the income elasticity of money as the %?M / %?PY, where M is the quantity of money held and PY is nominal income, would you suspect the coefficient to be positive, negative or zero? Will the absolute value be greater or less than 1? Be sure to explain your choices.
What will be an ideal response?
In order to be successful in a market economy, entrepreneurs must
A) produce a good that consumers value less than the resources used to produce it. B) combine resources in a manner that increases their value. C) produce anything that consumers value, regardless of cost. D) use only personal financial capital so they can avoid interest payments on borrowed funds.
Suppose there is an increase in the saving rate. This increase in the saving rate must cause an increase in consumption per capita in the long run when
A) capital per worker approaches the golden-rule level of capital per worker. B) the saving is used for education rather than physical capital. C) the rate of saving exceeds the rate of depreciation. D) there is no technological progress. E) technological progress depends on human capital.