If the equilibrium price of gasoline is $4.00 per gallon and the government will not allow oil companies to charge more than $3.00 per gallon of gasoline, which of the following will happen?
A. Supply must eventually increase so that the market will come into equilibrium at a price of $3.00.
B. The market will be in equilibrium at a price of $3.00.
C. A nonprice rationing system such as ration coupons must be used to ration the available supply of gasoline.
D. Demand must eventually decrease so that the market will come into equilibrium at a price of $3.00.
Answer: C
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In the figure above, the equilibrium market price is $20. The producer surplus equals
A) $20. B) $1,500. C) $3,000. D) 150. E) $4,500.
All of the following statements are true of the minimum efficient scale except one. Which one?
A) Any increase in the scale of operation will encounter either constant returns to scale or diseconomies of scale. B) All possible economies of scale have been exhausted. C) The short-run average total cost curve's minimum point is equal to the long-run average cost curve's minimum point. D) An increase in the output level will increase profit.
The infant industry argument calls for active government involvement
A) only if the government forecasts are accurate. B) only if some market failure can be identified. C) only if the industry is not one already dominated by industrial countries. D) only if the industry has a high value added. E) only if the industry is independently able to earn high returns.
In reality, according to the model developed in Section 15.5 of the textbook, prices of non-renewable resources have not increased continually because of
A) abundance of the resource. B) technological progress changing marginal cost. C) changing market power of producers. D) All of the above.