Excess demand occurs:
A. when price is above the equilibrium price.
B. when price is below the equilibrium price.
C. whenever the market is not in equilibrium.
D. whenever the market is in equilibrium.
Answer: B
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Suppose that capital and labor must be kept in a fixed proportion to produce a particular good. For example, digging a trench requires one worker who has one shovel. What does this imply about returns to scale?
A) There are constant returns to scale. B) There are increasing returns to scale. C) There are decreasing returns to scale. D) Nothing.
If an unregulated electric company is a monopolist, faces demand of Q = 100 - 50P, and has a constant marginal cost of 1, the profit-maximizing price is
a. 0 b. 1 c. 1.5 d. 2
How does asymmetric information affect market outcomes?
Refer to the total revenue graph below. When the seller is earning maximum revenues from selling Product X, the demand is:
A. Elastic
B. Inelastic
C. Unit-elastic
D. Perfectly inelastic